The following misstatements are sometimes found in the sales and collection cycle’s account balances: a. Cash received from collections of accounts receivable in the subsequent period is recorded as current period receipts. b. The allowance for uncollectible accounts is inadequate because of the client’s failure to reflect depressed economic conditions in the allowance. c. Several accounts receivable are in dispute as a result of claims of defective merchandise d. The pledging of accounts receivable to the bank for a loan is not disclosed in the financial statements. e. Goods shipped and included in the current period sales were returned in the subsequent period. f. Several accounts receivable in the accounts receivable master file are not included in the aged trial balance. g. One account receivable in the accounts receivable master file is included on the aged trial balance twice. h. Long-term interest-bearing notes receivable from affiliated companies are included in accounts receivable. i. The trial balance total does not equal the amount in the general ledger. Required: For each misstatement, list an internal control that should prevent it.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
The following misstatements are sometimes found in the sales and collection cycle’s account balances:
a. Cash received from collections of
b. The allowance for uncollectible accounts is inadequate because of the client’s failure to reflect depressed economic conditions in the allowance.
c. Several accounts receivable are in dispute as a result of claims of defective merchandise
d. The pledging of accounts receivable to the bank for a loan is not disclosed in the financial statements.
e. Goods shipped and included in the current period sales were returned in the subsequent period.
f. Several accounts receivable in the accounts receivable master file are not included in the aged
g. One account receivable in the accounts receivable master file is included on the aged trial balance twice.
h. Long-term interest-bearing notes receivable from affiliated companies are included in accounts receivable.
i. The trial balance total does not equal the amount in the general ledger.
Required: For each misstatement, list an internal control that should prevent
it.
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