AAT ITBK study materials
AAT ITBK study resources

AAT ITBK flashcards

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

Dual effect convention
Every transaction is recorded in at least two accounts with equal total debits and credits, so the ledger remains in balance.
DEAD CLIP mnemonic
Debits increase Expenses, Assets and Drawings; credits increase Liabilities, Income and Capital. The rule decides which side of a ledger account records an item.
Credit purchase of goods
Debit the purchases account with the net cost and credit the payables account, recording goods bought for resale on credit terms.
Credit sale of goods
Debit the receivables account and credit the sales account with the invoiced amount, recording income earned and a new asset.
Capital introduced
Debit the bank or cash account and credit the capital account when the owner brings personal money into the business.
Drawings
Debit the drawings account and credit cash, bank or purchases when the owner takes money or goods from the business for personal use.
Sales returns (returns inwards)
Goods returned by a customer: debit the sales returns account and credit receivables, reducing both sales income and the amount owed.
Purchase returns (returns outwards)
Goods returned to a supplier: debit the payables account and credit the purchase returns account, reducing both the debt and purchases.
Purchase order
A document sent by a buyer to a supplier requesting specified goods or services at agreed prices before delivery is made.
Goods received note
An internal document completed when goods arrive, confirming quantities and condition; it is later matched to the supplier's invoice.
Sales invoice
A document issued by the seller to the buyer showing goods supplied, prices, trade discount, VAT and the amount due.
Credit note
A document issued by a supplier to reduce the amount owed, for example after returned goods, an overcharge or an agreed allowance.
Statement of account
A periodic summary from a supplier listing invoices and credit notes with the closing balance owed; it is not a book of prime entry.
Sales day book
A book of prime entry listing credit sales invoices in date order; its periodic total is posted to the sales account.
Journal
A book of prime entry used for non-routine entries such as opening entries, corrections of errors and credit purchases of fixed assets.
Imprest system
A petty cash system where a fixed float is restored by topping up exactly the amount spent, keeping the float constant.
Bank statement
A bank document listing account transactions; from the bank's viewpoint deposits are credits and payments are debits, the reverse of the cash book.
Unpresented cheques
Cheques written and entered in the cash book but not yet cleared through the bank, so the statement balance appears higher.
Uncredited lodgements
Deposits paid into the bank and recorded in the cash book that do not yet appear on the bank statement.
Bank reconciliation statement
A statement explaining the difference between the cash book bank balance and the bank statement balance by listing unpresented cheques and uncredited lodgements.
Standing order
An instruction to the bank to pay a fixed amount to a named payee at regular intervals; only the payer can change the amount.
Direct debit
An authority letting a payee collect varying amounts from the customer's account on agreed dates, which the payer can cancel.
Dishonoured cheque
A cheque the bank refuses to pay, for example for insufficient funds; the original entry is reversed by debiting receivables and crediting bank.
Cash book
A book of prime entry and ledger account recording bank and cash transactions, usually with analysis columns and memorandum discount columns.
Accounting equation
Assets equal capital plus liabilities, so capital equals total assets minus total liabilities at any point in time.
Trial balance
A list of all ledger balances at a chosen date, split into debit and credit columns, which should total the same amount.
Error of omission
A transaction completely left out of the accounting records; the trial balance still balances because no entry was made at all.
Error of principle
An entry posted to the wrong type of account, such as capital expenditure recorded as a repairs expense in the profit and loss.
Compensating errors
Two or more separate errors whose debit and credit effects cancel out, so the trial balance totals still agree.
Suspense account
A temporary account opened on the side with the smaller total to make the trial balance agree until the error is found.
Cost of sales
Opening inventory plus purchases plus carriage inwards minus closing inventory; deducted from sales revenue to give gross profit.
Closing capital
Opening capital plus profit for the period minus drawings; it equals total assets minus total liabilities at the year end.