AAT POBC cheat sheet

Direct debit: amount and date vary, collected by the payee under the payer's signed mandate; standing order: fixed amount and date, set and changed only by the payer's instruction to their own bank.

CHAPS transfers are same-day, irrevocable and used for high-value or time-critical payments; BACS runs on a three-working-day cycle and suits payroll and supplier payment runs.

Three-way match before paying an invoice: purchase order, goods received note and supplier invoice must agree on price, quantity and payment terms.

The bank mandate names the authorised signatories and any dual-signature requirement or value limit; a payment released outside the mandate is unauthorised.

Segregation of duties requires that the person authorising a payment is not the person recording it in the ledger or performing the bank reconciliation.

A general crossing (two parallel lines) means the cheque must be paid into a bank account; adding 'account payee' restricts payment to the named payee's account.

A remittance advice lists the invoices and amounts a payment settles, enabling the supplier to allocate the receipt to the correct ledger account.

The direct debit guarantee entitles the payer to an immediate full refund from their own bank for any collection they did not authorise.

Supporting payment controls include pre-numbered cheques, restricted issue of online banking tokens, and regular reconciliation of supplier statements to the payables ledger.

Adjusted cash book balance = balance per bank statement + unpresented cheques − lodgements not yet credited, adjusted for any bank errors.

On a bank statement a credit balance is favourable (the bank owes the customer) and a debit balance is an overdraft, because the statement is written from the bank's viewpoint.

Items known only to the bank (bank charges, interest, standing orders, direct debits, BACS receipts, dishonoured cheques) are entered in the cash book, not in the reconciliation statement.

Timing differences (unpresented cheques and uncredited lodgements) appear only in the reconciliation statement and are never posted to the cash book.

Errors made by the business in its cash book are corrected in the cash book; errors made by the bank are corrected by the bank and shown as adjustments in the reconciliation.

A dishonoured customer cheque is credited in the cash book to reduce the bank balance and reinstated as a debit in the customer's receivables account.

The reconciliation is proved when the adjusted cash book balance equals the bank statement balance adjusted for timing differences and bank errors.

A cheque unpresented for more than six months should be investigated, as the bank may refuse payment and the liability may need to be reinstated.

Imprest amount = cash in hand + total of petty cash vouchers not yet reimbursed.

Reimbursement = imprest amount − cash in hand at the date of the claim, restoring the float to its fixed level.

Every petty cash payment requires a pre-numbered petty cash voucher showing date, payee, amount, expense category, and signed authorisation.

The petty cash book is a book of prime entry; analysis column totals are posted to the nominal ledger at each reimbursement rather than transaction by transaction.

In a columnar petty cash book the total payments column must equal the sum of all analysis columns; any difference is an addition or posting error.

On reimbursement the entry is Dr each expense account with its analysis total and Cr cash or bank, and the petty cash book balance returns to the imprest amount.

Cash in hand plus vouchers must always equal the imprest amount; a shortfall is written off as a petty cash discrepancy expense and investigated.

The petty cashier should not also operate the main cash book or bank account; a fixed float, low maximum payment and surprise cash counts are the key controls.

Receivables control account debits: opening balance, credit sales, interest charged, dishonoured cheques; credits: receipts, discounts allowed, sales returns, irrecoverable debts, contras, closing balance.

Payables control account credits: opening balance, credit purchases; debits: payments, discounts received, purchase returns, contras with receivables, closing balance.

A contra between a customer who is also a supplier is recorded as Dr payables control and Cr receivables control for the agreed set-off amount.

Each control account balance must equal the sum of the individual ledger balances it summarises; a difference means an error exists in one record or the other.

Trial balance agreement rules out arithmetic and single-sided posting errors, but not errors of principle, omission, commission, original entry, reversal or compensating errors.

A trial balance difference divisible by 9 suggests a transposition, such as £540 entered as £450.

A trial balance difference divisible by 2 suggests an amount posted to the wrong side of one account, since the resulting misstatement is twice the amount.

The suspense account holds the trial balance difference until the error is located and corrected by journal.

Error of principle: correct double entry but wrong class of account, for example a vehicle purchase debited to motor expenses instead of motor vehicles.

Error of commission: correct side and amount but the wrong account within the same class, for example posted to the wrong customer's account.

Error of original entry: a wrong amount entered in a book of prime entry and posted consistently to both accounts, so no suspense balance arises.

Complete reversal of entries and compensating errors leave the trial balance in agreement, so they are corrected by journal with no suspense entry.

An error affecting only one side of the double entry, such as one posting omitted entirely, creates a suspense balance equal to the omission.

A correction affecting both sides equally is a journal between the two accounts only; a correction affecting one side also uses the suspense account.

Sales day book overcast by £100: Dr Suspense £100, Cr Sales £100, clearing the debit balance in suspense.

The suspense account must end with a nil balance once all errors are found; any remaining balance means unresolved errors still exist.