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Ken Garrett.
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qing0401
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i m not understand about cut-off procedure.can you explain eg:sales made at this year end but receive money on next financial year,how to record this transaction??can you explain inventory,purchase,and others relate to cut off as well?
Ken Garrett
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Cut-off is to do with consistency.
If you ave made a sale towards the end of the year then you must ensure that the goods are not counted in inventory (though they might not be yet despatched), but are included in sales and receivables.
Similarly if you receive goods before year end, they will be in closing inventory, but if so then they must also be includes as a purchase and be included in payables. This is so even if an invoice has not been received so a journal would be required:
Dr Purchases
Cr Purchase reserve.
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