Substantive procedures to confirm receivables

Think about what you would expect to find on the Dr and Cr sides of a trade receivable. There are lots of reasons why there could be a Cr balance which essentially amount to the customer having paid more than they owe, for example:
– payment in advance of goods despatch (maybe a deposit)
– issue of a credit note in respect of an invoice that has been paid (e.g. for goods returned an over-pricing error on the invoice)
In the above, the Cr balance is a liability (and if the sum of such balances was material it would be classified as such in presenting receivable/payable balances in the FS).
But there could also be Cr balances which are essentially due to mispostings which would not be considered liabilities. For example:
– an invoice is missing from the a/c because it has been misposted to the a/c of another customer
– a receipt from another customer has been misposted to the a/c

See Chapter 16 – page 84: “assets, liabilities and equity interests are included
at appropriate amounts” – i.e. accurate
“and any resulting valuation or allocation adjustments are
appropriately recorded”. The terms “accuracy, valuation and allocation” are usually considered together. It means, for example, it trade receivables are “accurate” then any bad debt write off (a valuation adjustment) has been recognised as an expense (this is “appropriate recording” for this adjustment.