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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › CUT OFF

  • This topic has 1 reply, 2 voices, and was last updated 13 years ago by Ken Garrett.
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  • May 11, 2012 at 5:43 am #52595
    qing0401
    Member
    • Topics: 9
    • Replies: 2
    • ☆

    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?

    May 11, 2012 at 5:48 am #97421
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10594
    • ☆☆☆☆☆

    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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