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Level II Computerised Bookkeeping

Most of the candidates undertaking this exam are using Sage Instant Accounts or Line 50 software but there have been a few candidates using Quick Books and alternative accounting software.

The overall standard for this exam is high, with a high percentage of candidates achieving a Distinction.

As an examiner for this paper I have found a couple of problem areas, where it is apparent that quite a few candidates do not understand how to perform closing stock when there is an existing stock figure from the previous period.

Candidates enter closing stock but do not take into account the existing stock.

For Sage Instant Accounts Users (as there is not a Closing Stock Wizard available)

Here are some steps to help using the journal:

Closing Stock

Step 1:

Before you start, check that nominal code 1001 Stock contains the stock figure and that the Balance Sheet also shows a stock figure under Current Assets – this will be the closing stock from a previous period. For this example £4,500.00

Step 2:

You will now need to complete the journal to take the original closing stock figure out of nominal 1001 Stock and into Opening Stock nominal code 5200. This takes the figure from the Balance Sheet and puts it into the purchases section of the Profit and Loss Account.

Journal	Debit	Credit
1001 Stock 5200 Opening Stock	£4,500	£4,500
	£4,500	£4,500

Step 3

You have a closing stock figure of £5,000

You carry out the closing stock procedure and this then enters the figure of (£1,000) (being the difference between opening and closing stock) into the purchases section of the Profit and Loss Account and puts back the new closing stock figure of £5,500 into the Balance sheet as a Current Asset

Journal	Debit	Credit
1001 Stock 5200 Closing Stock	£5,500	£5,500
	£5,500	£5,500

If there was no stock figure from a previous period under nominal code 1001 and you were performing the closing stock for the first time, you would just need to carry out the above journal.

Sage Line 50 Users:

You can use the Opening/Closing Stock Wizard, as the wizard allows you to enter a previous stock figure and therefore completes both journals outlined above in one go.

Nominal Codes

Nominal codes and ranges are another area where candidates have problems.

When using software, it is easy to feel that “Sage does it all for you” but it is often more difficult to undo errors in a computerised bookkeeping program, than manual bookkeeping. This is why understanding where the data has gone once posted is paramount to mastering the bookkeeping software.

The software is governed by nominal codes, which in theory are no different to ledgers in manual bookkeeping but the software takes you one step further because, as you are posting out to the nominal codes, the program is in tandem, producing the financial reports – Profit and Loss Account, Balance Sheet.

Therefore it is important to study the nominal account ranges and their place in the chart of accounts, which is the layout for the financial reports. Always read your reports; try entering data and then reviewing their effects on the final reports.

Using the nominal ledger analyser in Sage, you can view the main range headings, which are:

Total Sales
Total Purchases
Total Direct Expenses
Total Overheads
Total Fixed Assets
Total Current Assets
Total Current Liabilities
Total Long Term Liabilities
Total Capital and Reserves

Within these range headings are the nominal codes relevant to these headings.

It is also useful to have a look at the Chart of Accounts, which is the layout for the financial reports.

Go to Modules- Nominal Ledger – then click on COA button on the toolbar. This will take you to the Chart of Accounts window; you will see the default layout of accounts highlighted in blue – click edit. In the Edit Chart of Accounts window, you can click on each of the Category Type descriptions in turn on the left to view the nominal code ranges on the right.

Do not change or edit any nominal codes, the purpose of this exercise is to just view the nominal ranges.

Remember it is crucial to post to the correct nominal codes in Sage as this has an important effect on your Final Reports.

-We are putting together a list for members of the all those transactions that you have difficulty in finding a nominal code for in Sage, or indeed in QuickBooks, as we have found this to be one of the most frequently asked questions through our member support Line.

P. Marshall
Examiner