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Dear Gromit,
I read from the book that where there is a risk that the sales invoices may be processed as a sale this year (i.e.2010), but goods will not be delivered until next year(2011), an audit procedure would be to review credit noes issued in next year (ie. 2011) for any that relate to the current year. (ie.2010)
Kindly give me guidance on the purposes for which credit notes are issued, and why it is important to review the credit notes in the above manner?
Thank you in advance for your help.
The main reason to review the credit notes issued early in the new year is to ensure that the sales towards the end of the previous year are genuine. For example, to boost income in 2010, process fake sales (Dr Customer, Cr Sales) and don’t sand the goods toe the customer; don’t send the invoice either. In January 2011, issue a credit note (Dr Sales, CR Customer). Destroy the invoice and matching credit note.
2010 sales will have been boosted.
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