AAT POBC key terms

An electronic system used to pay suppliers and employees in bulk, where payment files are submitted in advance and money clears over about three working days. It suits routine, low-value, non-urgent payments.

A same-day UK electronic payment system used for high-value or urgent payments. Once processed the payment cannot be recalled, so it is used where speed and certainty matter.

An instruction a customer gives to their bank allowing a supplier to collect varying amounts on agreed dates. The customer must be told in advance of each collection and can cancel the instruction.

An instruction to a bank to pay a fixed amount to a named payee at regular intervals, set up and changed by the payer. It suits constant amounts such as rent or insurance premiums.

A written order instructing a bank to pay a stated sum from the drawer's account to a named payee. Cheques are now uncommon and are typically used only for one-off or exceptional payments.

A document sent with or before a payment telling the supplier which invoices the money relates to. It helps the supplier allocate the cash correctly and avoid chasing the wrong items.

The formal authority held by a bank setting out who may sign cheques or authorise electronic payments on a business account, and any limits on that authority.

Splitting tasks so that no single person can both authorise and record a transaction. For example, the person who approves a payment is not the person who posts it to the ledger.

A document from the bank listing, for a period, every payment and receipt on the business account together with a running balance. It is the bank's record and may differ from the cash book.

A statement prepared at a particular date that explains the difference between the balance shown on the bank statement and the balance in the cash book, itemising timing differences and errors.

A cheque the business has issued and recorded in its cash book but which the payee has not yet banked, so it does not appear on the bank statement.

Money the business has received and paid into the bank, and already recorded in its cash book, which the bank has not yet credited to the account.

A difference between the cash book and the bank statement caused by the same transaction being recorded on different dates by the two parties. It disappears once the slower party records the item.

A cheque the bank refuses to pay, for example because the payer has insufficient funds. The business must reverse the original receipt and treat the customer's debt as owing again.

Amounts deducted by the bank for running the account, such as fees, interest and transaction charges. They appear on the statement but are missing from the cash book until it is updated.

The cash book balance after adding or deducting items the business had not recorded, such as bank charges, interest or dishonoured cheques. This figure is then used in the reconciliation.

A method of running petty cash in which a fixed sum is made available each period and later replenished only by the amount actually spent, so cash plus vouchers always equals the float.

The fixed sum of money held by the petty cashier at the start of each period. It is restored to that same amount whenever the petty cash is reimbursed.

A small numbered form completed for each petty cash payment, showing date, amount, payee and purpose, with a supporting receipt attached and the payment authorised. It supports the entry in the petty cash book.

A book of prime entry in which small cash payments are recorded, usually analysed into columns by type of expense. It operates alongside the imprest system.

Columns in the petty cash book used to group payments by type of expense, such as postage or travel, so that column totals can be posted to the correct ledger accounts.

The amount paid into petty cash at the end of a period to restore the float, equal to the total of the vouchers cashed. It is debited to expense accounts and credited to bank.

The person responsible for holding the petty cash, issuing vouchers, recording payments and keeping the cash secure. Keeping this role separate from the main cashier strengthens control.

A summary account in the general ledger that totals all the entries in a subsidiary ledger, so its balance can be checked against the total of the individual ledger balances.

An account recording the totals of sales, receipts, discounts and returns for credit customers. Its balance should equal the sum of all the individual customer balances.

An account recording the totals of purchases, payments, discounts and returns for credit suppliers. Its balance should equal the total amount owed to individual suppliers.

An entry that cancels a balance appearing in both the sales and purchase ledgers when the same business is both a customer and a supplier, posted to both control accounts.

A list of every ledger account balance at a given date, with debits in one column and credits in the other. If the totals agree, the double entry is arithmetically consistent.

A ledger holding the individual customer or supplier accounts, kept outside the double entry. Its total is regularly reconciled to the relevant control account in the general ledger.

The balancing figure written in a ledger account to make the two sides equal at a period end. It is brought down on the opposite side as the opening balance for the next period.

A mistake where a transaction is recorded in the wrong class of account, such as treating a capital purchase as a repair expense. The trial balance still agrees.

A transaction left out of the accounting records completely, with no debit and no credit posted. Because both sides are missing, the trial balance still balances.

An entry posted to the correct class of account but to the wrong individual account, such as the wrong customer's account within the sales ledger.

Wrong figures used for both the debit and the credit of an entry, for example the wrong amount copied from an invoice, so the double entry still balances.

Two or more separate errors that cancel each other out, so the trial balance still agrees even though the individual ledger balances are wrong.

Digits in an amount written in the wrong order, such as 540 recorded as 450. If the same wrong figure is used on both sides, the trial balance still agrees.

A temporary account opened when the trial balance does not agree, to hold the difference. It is cleared once the errors causing the imbalance have been found and corrected.

A record of a correction or adjustment showing which accounts are to be debited and credited, with a narrative explaining why. Corrections of error are made through the journal.