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sir, sorry for asking a lot. I got confused. :((
y/e 31/12/2019
Q1 : example, goods received before y/end and invoices before ye but payment made after y/e. So we recog accruals in 2019 right? so the payment we made deduct in 2020 right?
what if invoices received after y/e? when to recog payables? accruals still made in 2019?Q2: why one of sp for trade recv is to review after date cash payments to see whether they relate to current year to ensure record in correct acc period?
thank u sir for helping 🙂
Q1:
During the year for purchase invoices received:
Dr Purchases (expense)
Cr Trade payables (liability)At the year end – for physical inventory:
Dr Inventory (SoFP)
Cr Inventory (SoPL)
i.e. cost of physical inventory is a reduction in cost of sales (because goods have not yet been sold !)So if inventory received but purchase invoice NOT received (until after the year end) there would be a cut-off error. So purchase needs to be accrued:
Dr Purchases (expense)
Cr Goods received not invoiced accrual (liability)Q2: I think you are referring to a test for completeness for trade PAYABLES (and other liabilities). Say a y/e is 31 Dec – you would expect payments in January to include payments for amount owed at 31 Dec – so the auditor is checking that if indeed the expense related to the y/e 31 December that it is included in trade payables or accruals.
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