AAT Certificate in Accounting - Bookkeeping

L2 Maths and English Skills

  • Level 2 Maths Skills
    • M1: Using numbers & number system (whole numbers, fractions, decimals, percentages)
    • M2: Calculating numbers (up to 1 million) with checking strategies (estimation, approximation)
    • M5: Working out percentages and expressing one amount as a percentage of another
  • Level 2 Measure, Shape and Space Skills
    • M13: Calculating amounts (money, interest, percentage increases, and decreases, tax, budgeting)

Business Documents and Books of Prime Entry

  • Types of Business Documents:
    • Quotations, Purchase Orders, Sales Orders, Delivery Notes, Invoices, Return Notes, Credit Notes

Purpose of Accounting

  • Record & classify business transactions (e.g., sales, purchases, expenses)
  • Ensure all transactions are tracked systematically
  • Support accurate financial reporting

Accounting System Overview

  • Transaction Workflow:
    1. Business Transactions
    2. Business Documents
    3. Books of Prime Entry
    4. Ledger Accounts
    5. Trial Balance

Types of Transactions Flow

  • Credit Sale Process includes:
    • Customer requests details
    • Issuing quotation
    • Customer completes purchase order
    • Confirmation via sales order
    • Delivery of goods (documented via delivery note)
    • Issuing invoice upon delivery
    • Payment confirmation (remittance advice)

Key Business Document Examples

Quotation
  1. Purpose: Formal quote to customer when no price list is available.
  2. Contains: Business/customer details, date, description, pricing details, authorization signature.
Purchase Order
  1. Purpose: Buyer-generated document to authorize purchase.
  2. Contains: Buyer/supplier details, order date, sequential order number, descriptions, prices, authorizations.
Sales Order
  1. Purpose: Seller-generated document confirming the customer order.
  2. Contains: Quantity, type of goods, delivery details, pricing terms.
Invoice
  1. Purpose: Request for payment highlighting the transaction.
  2. Contains: Customer/business details, invoice number, delivery reference, VAT details, net/gross amounts.

Key Calculations with VAT

  • VAT Calculations:
    • Overall equations: If gross amount is known, examples include:
    • Finding VAT from gross: 20% VAT of £288,000 ⇒ £288,000 * (20/120) = £48,000.
    • If net amount is known: VAT from net of £120,000 ⇒ £120,000 * (20/100) = £24,000.

Discount Types Explained

  • Trade Discount: Deduction from the list price for loyalty.
  • Bulk Discount: Deductions based on the quantity ordered.
  • Prompt Payment Discount: Incentive for earlier payments.

Ledger Accounting

  • Double Entry Accounting Basics:
    • Every transaction affects two accounts (debits and credits).
  • Golden Rules for posting:
    • DEAD CLIC:
    • Debits increase: Expenses, Assets, Drawings
    • Credits increase: Liabilities, Income, Capital
  • Example of transaction:
    • E.g., John invests £5,000:
    • Dr. Cash (Assets) £5,000;
    • Cr. Capital (Liabilities) £5,000.

Cash Book Management

  • Cash Receipts Book: Records all cash income entries.
  • Cash Payments Book: Records cash expenses.

Petty Cash Systems

  • Imprest System: A fixed amount is used, and only exactly that amount is replenished.
  • Non-Imprest System: Cash is withdrawn regardless of past expenses.

Recurring Entries Setup

  • Recurring entries can include fixed transactions like rent, insurance etc. Procedures include:
    • Define account codes, transaction details, frequency, amounts, VAT codes.

Importance of Accuracy

  • Ensures bookkeeping entries reflect true business dealings and prevent discrepancies.
  • Critical for stakeholders' trust, accurate financial performance insight, and strategic planning.