Inventory:
Inventory is an asset of the company which includes work in progress, raw material and finished goods which are in the process of making or already ready to be sold in the market. In other words inventory is goods which are unsold and would be sold.
To compute: Day’s sales uncollected as of A Company and G Company and analyze.
Explanation of Solution
Day’s sales uncollected imply how much days a company takes to collect its accounts receivables.
Formula to calculate day’s sales uncollected is
Day’s sales uncollected for A Company
Day’s sales uncollected in current year:
Given info,
Net Sales is $233,715.
Substitute $16,849 for accounts receivable, and $233,715 for net sales in the above formula,
Day’s sales uncollected in prior year:
Given info,
Accounts Receivable is $17,460.
Net Sales is $182,795.
Substitute $17,460 for accounts receivable, and $182,795 for net sales in the above formula,
Hence, day’s sales uncollected are accounted for prior year is 34.86 days and for current year is 26.31 days .
(b) Day’s sales uncollected for G Company
Day’s sales uncollected in current year:
Given info,
Accounts Receivable is $11,556.
Net Sales is $74,989.
Substitute $11,556 for accounts receivable, and $74,989 for net sales in the above formula,
Day’s sales uncollected in prior year:
Given info,
Accounts Receivable is $9,383.
Net Sales is $66,001.
Substitute $9,383 for accounts receivable, and $66,001 for net sales in the above formula,
Thus, day’s sales uncollected are accounted for 51.89 days.
Hence, day’s sales uncollected are accounted for prior year is 51.89 days and for current year is 56.24 days .
Review about trend of the companies:
- It is concluded that A Company has improved slightly in order to collect its receivables as now it would take 8.55 (34.86-26.31) less days to collect receivables.
- It is concluded that G Company has not improved in order to collect its receivables because now it would take 4.36 (56.25-51.89) more days to collect receivables.
Company with largest percentage change:
- It is ascertained that the day’s sales uncollected for A Company increased by 8.4% whereas the day’s sales uncollected for G Company decreased by 24.5%
- It is concluded that G Company has not managed its number of day’s sales uncollected as compared to previous year while A Company is much efficient than G Company.
Want to see more full solutions like this?
Chapter 6 Solutions
FINANCIAL ACCOUNTING FUNDAMENTALS
- A company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure? A. No changes would be made since the person paying the bills is different from the person ordering the inventory. B. The person in accounts payable should generate the purchase order. C. The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received. D. The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.arrow_forwardDescribe the who, what, where, and how of the following scenario: A customer gives his purchase to a sales clerk, who enters the sale in a cash register and puts the money in the register drawer. At the end of the day, the sales clerk gives the cash and the register tape to the cashier.arrow_forwardThe sales department receives the unstandardised sales order since customer orders are mailed, e-mailed or faxed to the sales department. The sales clerk first converts the unstandardised sales order into the standardised sales order. For this purpose, the sales representative requests the missing information, if any. When the order is received, the sales clerk checks the customer’s creditworthiness of the customer from his computer terminal. Three years ago, the sales clerk requested the accounting department to provide him with a list of customers whose account receivables are written off. The sales clerk is still using this information to check the creditworthiness of the customers. The sales clerk is using the same procedure to check the creditworthiness of the new customers.The customer’s order is rejected if the customer’s credit is not verified. The sales order processing is started after the credit verification. In particular, the sales clerk records the approved standardised…arrow_forward
- The sales department receives the unstandardised sales order since customer orders are mailed, e-mailed or faxed to the sales department. The sales clerk first converts the unstandardised sales order into the standardised sales order. For this purpose, the sales representative requests the missing information, if any. When the order is received, the sales clerk checks the customer’s creditworthiness of the customer from his computer terminal. Three years ago, the sales clerk requested the accounting department to provide him with a list of customers whose account receivables are written off. The sales clerk is still using this information to check the creditworthiness of the customers. The sales clerk is using the same procedure to check the creditworthiness of the new customers.The customer’s order is rejected if the customer’s credit is not verified. The sales order processing is started after the credit verification. In particular, the sales clerk records the approved standardised…arrow_forwardA company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure? Group of answer choices 1.The person in accounts payable should generate the purchase order. 2.The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received. 3.No changes would be made since the person paying the bills is different from the person ordering the inventory. 4.The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.arrow_forwardA client erroneously recorded a large purchase twice. Which of the following internal accounting control measures would be most likely to detect this error in a timely and efficient manner? A. Sending written quarterly confirmations to all vendors, B. Reconciling vendors' monthly statements with subsidiary payable ledger accounts. C. Footing the purchases journal D. Tracing totals from the purchases journal to the ledger accountsarrow_forward
- Assume that you are a cashier and your manager requires that you immediately enter each sale when it occurs. Recently, lunch hour traffic has increased and the assistant manager asks you to avoid delays by taking customers’ cash and making change without entering sales. The assistant manager says she will add up cash and enter sales after lunch. She says that, in this way, customers will be happy and the register record will always match the cash amount when the manager arrives at three o’clock.The advantages to the process proposed by the assistant manager include improved customer service, fewer delays, and less work for you. The disadvantage is that the assistant manager could steal cash by simply recording less sales than the cash received and then pocketing the excess cash. You decide to reject her suggestion without the manager’s approval and to confront her on the ethics of her suggestion. Propose and evaluate two other courses of action you might consider, and explain why.arrow_forwardAssume that you are a cashier and your manager requires that you immediately enter each sale when it occurs. Recently, lunch hour traffic has increased and the assistant manager asks you to avoid delays by taking customers’ cash and making change without entering sales. The assistant manager says she will add up cash and enter sales after lunch. She says that, in this way, customers will be happy and the register record will always match the cash amount when the manager arrives at three o’clock. The advantages to the process proposed by the assistant manager include improved customer service, fewer delays, and less work for you. The disadvantage is that the assistant manager could steal cash by simply recording less sales than the cash received and then pocketing the excess cash. You decide to reject her suggestion without the manager’s approval and to confront her on the ethics of her suggestion. Required Propose and evaluate two other courses of action you might consider, and explain…arrow_forwardRequired Given that prudence is the main consideration, discuss under what circumstances, if any, revenue might be recognized at the following stages of a sale. (a) Goods have been acquired by the business, which it confidently expects to resell very quickly.(b) A customer places a firm order for goods.(c) Goods are delivered to the customer.(d) The customer is invoiced for goods.(e) The customer pays for the goods. (f) The customer’s cheque in payment for the goods has been cleared by the bank.arrow_forward
- You have Noticed that the A/R clerk has created abnormally high number of credit memos . You also notice the inventory does not reflect the additional inventory resulting from the sales returns. What would you do, and how would you document your decision?arrow_forwardWhich common workflow error can cause duplicate expenses in QuickBooks Online? -Create a purchase order to record vendor expense and copy to bill to pay vendor later for the same expense -Create a bill to record a vendor expense, and use Pay Bills to pay the vendor for the same expense -Create a bill to record a vendor expense, and create a check to the vendor for the same expense -Create a bank rule to automatically categorize a common vendor expensearrow_forwardMaking a sale to customer who are already behind in making the payments on account is a threat. Rena is making a credit sale to Sara, a customer who is already six months behind in making payments on his account. What internal control procedure(s) would provide protection against these threats?arrow_forward
- Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage LearningCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College PubCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,