AAT POBC flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Direct debit

A variable payment collected by the payee from the payer's bank under a signed mandate. The payer is protected by the direct debit guarantee, which gives a right to an immediate refund of unauthorised collections.

Standing order

A fixed payment of a set amount made at regular intervals, which the payer instructs their own bank to make. Only the payer can change or cancel the amount or the date.

CHAPS payment

A same-day electronic payment system used for high-value or time-critical transfers. Once processed a CHAPS payment is irrevocable, so strict authorisation controls are needed before release.

Remittance advice

A document sent with a payment showing the invoices and amounts being settled. It allows the supplier to allocate the receipt to the correct customer ledger account.

Segregation of duties

A control that separates authorising, recording and custody of payments between different people, so no single person can both initiate a payment and record or reconcile it.

Three-way match

Checking a supplier invoice against the related purchase order and goods received note before payment, confirming that price, quantity and terms agree across all three documents.

Bank mandate

The formal instruction to the bank naming the people authorised to sign cheques or release electronic payments, often with value limits or a requirement for two signatures.

Unpresented cheque

A cheque written and recorded in the cash book that the payee has not yet presented to the bank. It appears in the reconciliation as an addition to the bank statement balance.

Uncredited lodgement

Cash or cheques paid into the bank and entered in the cash book but not yet shown on the bank statement. It is deducted from the statement balance in the reconciliation.

Adjusted cash book balance

The cash book balance after entering items known only to the bank, such as charges, interest, standing orders, direct debits and dishonoured cheques. It is the figure proved by the reconciliation.

Dishonoured cheque

A customer cheque the bank refuses to pay, for example because of insufficient funds. The cash book balance is reduced and the customer's account is reinstated as owing the amount.

Bank statement credit balance

A favourable balance from the customer's point of view, because the statement records money the bank owes the customer. An overdraft appears as a debit balance on the statement.

Bank reconciliation statement

A schedule starting with the bank statement balance and adjusting for timing differences and bank errors to arrive at the adjusted cash book balance, proving that the two records agree.

Bank charges not in cash book

Charges deducted by the bank but not yet recorded by the business. They are entered in the cash book as an expense, with a corresponding reduction in the bank balance.

Imprest system

A petty cash method in which a fixed sum, the float, is issued and periodically restored by reimbursing exactly the amount spent, so cash in hand returns to the float.

Petty cash voucher

A pre-numbered document supporting every petty cash payment, showing date, payee, amount, expense category and authorisation. Vouchers plus remaining cash must equal the imprest amount.

Petty cash reimbursement

The amount claimed to restore the float, calculated as the imprest amount minus the cash actually in hand at the date of the claim, paid from the main bank account.

Columnar petty cash book

A petty cash record with a total payments column and separate analysis columns for each expense type, so nominal ledger postings can be made from the column totals.

Petty cash discrepancy

The amount by which cash in hand plus vouchers falls short of the imprest amount, written off to an expense account and investigated through surprise cash counts.

Imprest amount formula

The imprest amount equals cash in hand plus the total of unpaid petty cash vouchers, and the reimbursement equals the imprest amount minus cash in hand.

Receivables ledger control account

A nominal ledger account summarising all customer accounts. Debits include credit sales and dishonoured cheques; credits include receipts, discounts allowed, sales returns and irrecoverable debts written off.

Contra entry

A set-off agreed between a customer who is also a supplier. It is recorded as a debit in the payables ledger control account and a credit in the receivables ledger control account.

Trial balance

A list of all ledger account balances at a given date, showing debit and credit columns. Equal totals confirm double entry was arithmetically complete but do not prove the records are error-free.

Errors not affecting trial balance

Errors of principle, omission, commission, original entry, complete reversal and compensating errors leave the trial balance in agreement, because total debits and credits still match.

Transposition error

Writing the digits of an amount in the wrong order, such as recording £540 as £450. The resulting trial balance difference is always exactly divisible by nine.

Suspense account

A temporary account holding the difference when the trial balance does not agree. It is cleared by journal entries once the errors are found and should end with a nil balance.

Error of principle

A transaction recorded with the correct double entry but the wrong type of account, for example capital expenditure on a vehicle debited to motor expenses rather than motor vehicles.

Error of commission

An entry posted to the correct side and for the correct amount but to the wrong account within the same class, such as the wrong customer's personal ledger account.

Error of original entry

An incorrect amount entered in a book of prime entry and then posted consistently to both sides of the double entry, so no suspense account balance arises.

Compensating errors

Two or more unrelated errors that cancel each other out, leaving the trial balance in agreement even though the individual ledger account balances are wrong.

Complete reversal of entries

Both sides of a transaction posted the wrong way round, debits as credits and vice versa. The trial balance still agrees and the error is corrected by doubling the original entry.

Correcting an overcast sales day book

Overcasting the sales day book overstates sales and leaves a debit balance in suspense. Correct it by debiting suspense and crediting sales with the amount of the overcast.