Bookkeeping And Accounting In A Week

Learn To Keep Books And Accounts In Seven Simple Steps

Roger Mason, Roger Mason Ltd

• Publisher: Teach Yourself
• Year: 2012
• Print ISBN: 9781473607699
• eBook ISBN: 9781444158762
• Topic: Business
• Subtopic: Accounting
• Index: Business

Bookkeeping and Accounting In A Week i s a simple and straightforward guide to accounts, giving you everything you need to know in just seven short chapters. From understanding the terminology to dealing confidently with accountants, you'll soon master the basics of bookkeeping and accounting, fast.This book introduces you to the main concepts of bookkeeping and accounting, giving you a basic knowledge and understanding together with practical and thought-provoking exercises. Whether you choose to read it in a week or in a single sitting, Bookkeeping and Accounting In A Week is your fastest route to success: - Sunday: The basic principles of bookkeeping
- Monday: Different types of account and ledger
- Tuesday: More aspects of bookkeeping
- Wednesday: Preparation for the accounts
- Thursday: The profit and loss account
- Friday: The balance sheet
- Saturday: Understanding published accounts ABOUT THE SERIES
In A Week books are for managers, leaders, and business executives who want to succeed at work. From negotiating and content marketing to finance and social media, the In A Week series covers the business topics that really matter and that will help you make a difference today. Written in straightforward English, each book is structured as a seven-day course so that with just a little work each day, you will quickly master the subject. In a fast-changing world, this series enables readers not just to get up to speed, but to get ahead.

Now that we have learned the basic principles of bookkeeping and discovered how to prepare accurate and complete bookkeeping records, we can turn our attention to the process involved in preparing the final accounts. However, there is more work to be done first.

Today we must look at important accounting entries which are not yet recorded in the trial balance but which are vital to the preparation of accurate accounts. We then conclude today’s work by seeing how the trial balance is adjusted to reflect these entries.

The programme is:

• accruals

• prepayments

• reserves and provisions

• depreciation

• posting final adjustments and the extended trial balance.

Accruals

We concluded yesterday’s work by considering the trial balance. This should accurately reflect the position after posting all the entries. But what about charges that have not yet been put into the accounts? Sometimes a supplier may be late submitting an invoice. If you work in a large accounts office, you will know that an occasional invoice may be submitted a year or more after the event.

Furthermore, suppliers’ invoices may be lost or held up pending approval. The more quickly the books are closed off after the end of the accounting period, the more numerous will be the invoices not entered.

These problems can be overcome by entering what are called accruals. Accruals are costs incurred but not yet entered. They are calculated in one of two ways:

1 a specific invoice received after the close off–

– If the electricity bill to 31 March is £1,507.46 and accounts are done for the year to 31 March, then you will accrue either £1,507 or £1,500.

2 an informed estimate

– If the electricity bill averages £1,000 a quarter and the last bill is up to 15 March, it would be reasonable to accrue £170 at 31 March. It is usual for most accruals to be informed estimates.

The accounting entry is to debit the account of the expense (e.g. electricity) and to credit the accruals account. The accruals account is a liability account because it is money owing by the business.

Prepayments

A prepayment is the exact opposite of an accrual, which is a cost incurred but not yet entered. A prepayment is a cost entered but not yet incurred.

A prepayment may be necessary because a supplier has raised an invoice early, or because you have left the books open to catch as many invoices as possible and one from the next period has slipped through. For example, an invoice dated 3 July may slip through if you make the accounts up to 30 June but leave the books open for two weeks beyond that date.

More usually, a prepayment may be necessary because an invoice has been entered that covers a benefit to be received in the future. A common example is insurance, which may be paid a year in advance.

Prepayments in practice Consider an insurance invoice for £12,000 that has been paid on 31 December for insurance cover over the following 12 months. Let us assume that the business prepared its accounts at 30 June. Obviously, unless an ad...

Table of contents

• Cover 
• Title
• Contents 
• Introduction
• Sunday: The basic principles of bookkeeping
• Monday: Different types of account and ledger
• Tuesday: More aspects of bookkeeping
• Wednesday: Preparation for the accounts
• Thursday: The profit and loss account
• Friday: The balance sheet
• Saturday: Understanding published accounts
• 7 × 7
• Glossary
• Answers
• Copyright