AAT ITBK flashcards
AAT ITBK · Build recall with a focused review session.
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.