AAT Level 1 Award in Bookkeeping - Bookkeeping Fundamentals

Complete study vocabulary flashcards for AAT Level 1 Award in Bookkeeping Fundamentals.

Role of a Bookkeeper

To record financial transactions accurately, timely, and ethically, maintaining the books of prime entry and ledgers.

5 AAT Ethical Principles

Integrity, Objectivity, Professional Competence & Due Care, Confidentiality, Professional Behaviour.

Integrity

Being straightforward and honest in all professional relationships.

Confidentiality

Not disclosing information without consent unless legally required.

3 Main Types of Business

Sole Trader, Partnership, Limited Company (Ltd).

Unlimited Liability

Owner personally responsible for debts - Sole Traders and Partnerships.

Separate Legal Entity

Business legally separate from owners - Limited Companies.

Sales Invoice

Document sent TO customer requesting payment for credit sales.

Purchase Invoice

Document received FROM supplier requesting payment for credit purchases.

Credit Note

Document issued when goods returned or invoice overcharged - reduces amount owed.

Statement of Account

Summary from supplier showing invoices, credit notes, payments and balance.

Remittance Advice

Document from customer showing which invoices are being paid.

Receipt

Proof payment received.

Petty Cash Voucher

Document for small cash payments like postage, tea/coffee.

Dual Effect / Double Entry

Every transaction has two effects: debit in one account, credit in another of equal value.

Accounting Equation

$$\text{Assets} = \text{Capital} + \text{Liabilities}$$

DEAD Rule

Rule for debits: Debits = Expenses, Assets, Drawings (Increase = Debit).

CLIC Rule

Rule for credits: Credits = Liabilities, Income, Capital (Increase = Credit).

Double Entry: Buy Stock $500$ Cash

Debit Purchases $500$, Credit Cash $500$

Double Entry: Sell Goods $1000$ on Credit

Debit Receivables/Debtors $1000$, Credit Sales $1000$

Double Entry: Owner Puts $5000$ Capital in Bank

Debit Bank $5000$, Credit Capital $5000$

Double Entry: Pay Supplier $300$ from Bank

Debit Payables/Creditors $300$, Credit Bank $300$

Double Entry: Customer Pays $400$ Cash

Debit Cash $400$, Credit Receivables $400$

Double Entry: Drawings $100$ Cash

Debit Drawings $100$, Credit Cash $100$

Chart of Accounts

List of all ledger accounts, each with a unique code.

Books of Prime Entry

Where transactions are first recorded: Day Books, Cash Book, Petty Cash Book, Journal.

Sales Day Book

Contains ALL credit sales invoices, NOT cash sales.

Purchases Day Book

Contains ALL credit purchases invoices, NOT cash purchases.

Sales Returns Day Book

Contains all sales credit notes issued.

Purchases Returns Day Book

Contains all purchases credit notes received.

Cash Book

Records BOTH bank and cash transactions - also acts as a ledger account.

Cash Book Sides

Debit = receipts (money in), Credit = payments (money out).

Petty Cash Book

Records small cash payments, using the Imprest system.

Imprest System

Float topped up to fixed amount e.g. $100$. If $42$ spent, $42$ reimbursed.

Ledger

Collection of all accounts where double entries are posted.

T-account

Ledger account split into debit left and credit right.

Balance c/d and b/d

c/d = carried down (closing balance); b/d = brought down (opening balance next period).

Trade Receivables Ledger

Individual customer accounts who owe us - Asset.

Trade Payables Ledger

Individual supplier accounts we owe - Liability.

General Ledger

Contains Sales, Purchases, Expenses, Capital, Bank.

Trial Balance

List of all debit and credit balances to check debits = credits.

Error of Omission

Transaction completely omitted - TB still balances.

Error of Commission

Correct amount posted to the wrong person - TB still balances.

Error of Principle

Wrong type of account used e.g. Vehicle as Expense - TB still balances.

Error of Reversal

Debit and credit entries reversed - TB still balances.

Error of Original Entry

Wrong amount entered in both debit and credit - TB still balances.

Sales and Purchases in TB

Sales = Credit, Purchases = Debit.

Bank Balance in TB

If positive = Debit, If overdrawn = Credit.

Capital in TB

Credit.

Methods of Payment

Cash, BACS, Direct Debit, Standing Order, Debit/Credit Card, Cheque (rare).

Bank Reconciliation

Checking Cash Book vs Bank Statement for differences.

Unpresented Cheque

Cheque paid but supplier hasn't banked - in Cash Book not Bank Statement.

Outstanding Lodgement

Money banked but not yet cleared on statement.

Cash Sale vs Credit Sale Recording

Cash = Cash Book immediately; Credit = Sales Day Book first.

What does Objectivity mean for a bookkeeper?

Not allowing bias or personal interest to influence judgement

What does Professional Competence mean?

Keeping knowledge up to date and acting with diligence

Increase in Drawings - Debit or Credit?

DEBIT - Drawings is DEAD

Pay £200 for Office Expenses from Bank - double entry?

Debit Office Expenses £200, Credit Bank £200

What is the difference between a Sales Ledger and Sales Day Book?

Day Book = list of ALL credit sales. Ledger = individual account for EACH customer

If Trial Balance balances, what 2 things does it prove?

Total debits = credits 2. No arithmetic errors in double entry, but does NOT prove no errors

Where does Trade Receivables go in TB? Debit or Credit?

DEBIT - it's an asset, customers owe us

Where does Trade Payables go in TB? Debit or Credit?

CREDIT - it's a liability, we owe suppliers

What is the Imprest amount if: Started with £100, spent £37, topped up with £37?

Float stays £100, imprest is £100