- July 26, 2021 at 6:17 am #629423
doubt 1: “Review after date payments; if they relate to the current year, then follow through to the payables ledger or accrual listing to ensure they are recorded in the correct period.”
maam what is this point trying to convey?
any after date(i suppose post yr-end) payments for TP or accrual existing at yr-end, should REDUCE IT(TPs/accrual)
that there should be an equivalent accrual or TP present at the yr -end in balance of amount outstanding(just to ensure no TPs or accrual goes UNRECORDED for the face of SFP).
and if the latter is the case, i.e. we are checking if the appropriate amount of accrual is there or not, then why did the sentence not directly END with “…ensure that an outstanding balance is recorded for them at yr end date and that they are NOT recorded in the CURRENT period.”July 26, 2021 at 6:19 am #629424
doubt 2: maam can we write the following as a substantive procedure for TPs:
“review any post yr end purchase returns/credit notes received, if they relate to current yr purchases then ensure that TPs balance has been reduced.”July 26, 2021 at 11:20 am #629462Kim SmithKeymaster
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Assume 31 December reporting date:
$1,000 paid on 3rd January – why? Either already owed at 31 Dec – in which case it must be recorded as a liability at the reporting date OR it is a “next year” expense.
After-date payments only reduce the liability after the reporting date – they don’t change the reported position as at the reporting date.
Yes you could expand on “correct period” – e.g. “in 20X0” but take care with use of “current period” – in AUDIT context “current” generally means the year covered by the financial statements.
Yes your doubt 2 is fine.July 27, 2021 at 2:35 am #629521
based on the definition of current period you mentioned, which i understood as: if 31dec 20X1 is the yr end, books are being authorised on 30april 20X2, then CURRENT period would mean year ending to 31dec 20X1 only.
and based on this understanding can i write the following point with regards to COMPLETENESS and EXISTENCE of TPs and accruals?
“Review after date payments; if they relate to the current year, then follow through to the payables ledger or accrual listing to ensure that there are no unrecorded liabilities and any after date payments do not reduce current period TPs balance and accruals listing.”July 27, 2021 at 7:27 am #629529Kim SmithKeymaster
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Perhaps you need to look back to FA/F3 and remind yourself of some double-entry bookkeeping.
If $1,000 (in my example) is included in y/e TP, double entry (ALREADY made) was:
Dr Expense/asset and Cr TP.
If $1,000 not in y/e TP but should be accrued, the y/e adjustment is:
Dr Expense/asset and Cr Accrual.
AFTER the y/e, the D/E arising from the cashbook entry is then:
Dr TP/accrual and Cr Cash.
Can you see that “and any after date payments do not reduce current period TPs balance and accruals listing” is meaningless? It is simply not possible.
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