- This topic has 1 reply, 2 voices, and was last updated 1 year ago by
.
- Posts
The following is a substantive procedures for the accrual for income tax payable on employment income at page 257 BPP AA pactice and revision kit, for the answer of question 117 on page 69:
“Agree the subsequent payment to the post year-end cash book and bank statements to confirm completeness”
I want to ask in post year-end cash book and bank statements, whether the amount of actual payment to tax authority is recorded here?
And “subsequent payment” in this substantive procedure is the amount of payment calculated by the company and this may be different from the amount recorded in the post year-end cash book and bank statements?
Please explain more to me about this substantive procedure, why it is a proof of completeness?See this post about the tax accrual https://opentuition.com/topic/deficiencies-in-payroll-cycle-and-tax-accrual
Review of payments after the y/e is a main test for completeness of recording of liabilities. Suppose y/e is 31 Dec. Mid-Jan (say), a company will pay the tax authorities what it deducted/held back from payments to employees as recorded in the December payroll. Say it is $10,235 in the cash book – that should be the same amount as the bank statement – and the total of the deductions according to the payroll. A difference would not be expected, but that doesn’t mean to say there couldn’t be one – which would have to be verified. For example, if the company missed the payment deadline in Dec (for the November payroll deductions), there would be some penalty – which might either be included in the Jan payment, or be paid as a separate amount. In either case it should be included in y/e accruals.
- You must be logged in to reply to this topic.