Podcast
Questions and Answers
The completeness assertion ensures that all transactions that should have been recorded are included without omissions.
The completeness assertion ensures that all transactions that should have been recorded are included without omissions.
True
The accuracy assertion indicates that all documents are prepared without any errors in recording or posting.
The accuracy assertion indicates that all documents are prepared without any errors in recording or posting.
True
In testing for occurrence, the procedure starts with the underlying documents and checks backward to the ledger entries.
In testing for occurrence, the procedure starts with the underlying documents and checks backward to the ledger entries.
False
Cut-off asserts that all transactions are recorded in the appropriate accounting period.
Cut-off asserts that all transactions are recorded in the appropriate accounting period.
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Classification ensures that transactions are posted to the correct accounts, like posting raw materials purchase to repairs and maintenance.
Classification ensures that transactions are posted to the correct accounts, like posting raw materials purchase to repairs and maintenance.
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Presentation in accounting means that the descriptions and disclosures must be complex and hard to understand.
Presentation in accounting means that the descriptions and disclosures must be complex and hard to understand.
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To test completeness, one selects customer orders and checks them against sales invoices and the corresponding ledger entries.
To test completeness, one selects customer orders and checks them against sales invoices and the corresponding ledger entries.
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The relevant test for cut-off includes tracing last goods received notes to ensure they are recorded in the correct year-end purchases.
The relevant test for cut-off includes tracing last goods received notes to ensure they are recorded in the correct year-end purchases.
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Aggregation means to separate and subtract individual items to get a total figure in accounting.
Aggregation means to separate and subtract individual items to get a total figure in accounting.
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Reperformance of calculations serves as a test for the accuracy of transactions recorded in the ledgers.
Reperformance of calculations serves as a test for the accuracy of transactions recorded in the ledgers.
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Study Notes
Completeness
- Ensures all transactions that should be recorded are included, preventing omissions.
- Testing involves selecting a sample of customer orders and verifying them against dispatch notes and sales invoices.
- Completeness testing starts from underlying documents, ensuring entries in the ledger are not missed.
Occurrence
- Validates that recorded transactions actually took place.
- Testing for occurrence involves starting from the ledger entries and tracing back to supporting documents.
Accuracy
- Refers to the absence of errors in document preparation and transaction postings.
- Ensures disclosures are accurately measured and described, without misstatements.
- Relevant testing includes reperformance of calculations (invoices, payroll) and reviewing control account reconciliations.
Cut-off
- Ensures transactions are recorded in the correct accounting period, maintaining accuracy.
- Relevant testing includes recording last goods received and dispatch notes during inventory counts and tracing them to purchase and sales invoices.
Classification
- Ensures transactions are recorded in appropriate accounts, e.g., raw materials not mistakenly posted to repairs and maintenance.
- Relevant testing involves checking purchase invoices against general ledger postings.
Presentation
- Focuses on the clarity and relevance of descriptions and disclosures of transactions.
- Transactions should be appropriately aggregated (combined) or disaggregated (separated into components).
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Description
This quiz focuses on the concept of completeness in accounting, particularly in relation to customer orders and sales transactions. It examines testing procedures and how to verify none of the transactions have been omitted from the records. Prepare to dive into methods for ensuring thorough documentation and accuracy in financial reporting.
