Section 3 Vocab - IGCSE Accounting

Bank reconciliation statement

A document prepared by a business following receipt of a bank statement from its bank to check if it agrees with its own records of bank transactions in its cash book, and if not to identify the reasons for any difference

Compensating error

Where two or more errors for the same amount on opposite sides of the accounts, cancel each other out

Contra entries in control accounts

Contra entries required in the sales and purchases ledger control accounts to record an inter-ledger transfer between a trade receivable account and a trade payable account. This occurs when a business is both a supplier of and customer of another organisation at the same time. When this happens the balances on the two accounts are set off against each other to find the net balance.

Control account

An account that enables a business to check the arithmetical accuracy of entries posted to its ledger

Direct debit

An instruction issued by a business to its bank to allow a supplier to collect amounts due directly from it's bank current account, for example, to pay monthly electricity bills or annual insurance premiums

Dishonoured cheque

A cheque received that a bank has refused to accept because the payee (the person or organisation who issued it) has insufficient funds in their current account to pay the amount written on it

Error of commission

An accounting error that will not be revealed by a trial balance. It occurs when an entry has been made to the correct side of an account for the correct amount but in the wrong account of the same class or type, for example, crediting a payment received from M Patel to the trade receivable account of N Patel

Error of complete reversal

An accounting error that will not be revealed by a trial balance because the debit entry for a transaction has been recorded as a credit and the credit entry has been recorded as a debit

Error of omission

An accounting error that will not be revealed by a trial balance because the double entries for a transaction have not been recorded in the ledger

Error of original entry

An accounting error that will not be revealed by a trial balance because the posting of an amount from a book of prime entry to the ledger accounts has resulted in both the debit and credit entries being equal but incorrect

Error of principle

An accounting error that will not be revealed by a trial balance because the error occurs when a debit or credit entry for the right amount has been misposted to the wrong type or class of account, such as, debiting in error expenses for vehicles repairs to the asset account for vehicles.

Purchases ledger control account

An account prepared to check the arithmetical accuracy of trade payable accounts in the purchases ledger

Sales ledger control account

An account prepared to check the arithmetical accuracy of trade receivable accounts in the sale ledger

Standing order

An instruction issued by a business to its bank to make regular fixed payments automatically from its current account to the current account of a named individual or organisation

Statement of account

A summary issued by a supplier to a credit customer at the end of each month recording the transactions that have taken place between them. The statement can be used to check the accuracy of ledger account entries and is also a request for payment of the balance owing on the account

Suspense account

A temporary account used to record the balance necessary to make the totals on the two sides of a trial balance agree

Trial balance

A summary of all the balances on the accounts in the ledger at the end of a month or an accounting year. It is used to check that the total of debit balances equals the total of credit balances and therefore for any errors in the accounts that may cause the totals to be unequal. A trial balance is also drawn up at the end of each accounting year to help prepare the financial statements of the business

Unpresented cheque

A cheque received by a business and entered to its cash book but which has yet to be paid into the business bank account and will not therefore appear on its bank statement