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3501

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Accounting

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Apr 3, 2024

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QS1 Part 1 Objective Questions QQ1. What value would be recorded for total sales revenue on the income statement for 2020? $5,262,936.22 should be reported for total sales revenue on the income statement for 2020. QQ2. Which month recorded the highest sales revenue? September had the highest sales revenue. QQ3. What value would be recorded for total accounts receivable on the balance sheet for 2020, excluding the allowance for doubtful accounts? $1,077,823.58 would be recorded for total accounts receivable on the balance sheet for 2020. Not sure if we should deduct the 3% write-off. QQ4. If management estimates about 5 percent of sales to be written off each month, which month(s) exceeded that estimate? February exceeded the estimated 5% of sales to be written off. QQ5. If management estimates about 3 percent of the accounts receivable balance to be written off, what would be the adjustment amount for bad debts expense at the end of the year? $1,077,823.58 * 3% = $32,334.71 would be the adjustment amount for bad debts expense at the end of the year. QQ6. Which month’s accounts receivable balance is most likely to be written off? May’s accounts receivable balance is most likely to be written off since it’s such a small amount. QS1 Part 1 Analysis Questions AQ1. Why do you think there are no write-offs in November and December? There could be several reasons why there are no write-offs in November and December such as extended payment terms that allow the customers more time to settle their invoices. Another reason could be that some companies avoid write-offs in November and December due to the close proximity to the end of the calendar year, preferring to assess their financial standing at year-end and make appropriate financial decisions then. AQ2. How could management estimate the write-offs for November and December? Management could base their estimates for November and December on historical data analysis by analyzing trends and patterns that may influence write-off rates during these months. They could also take into consideration customers payment

patterns, collections performance and customer segmentation type of analysis to estimate the write-offs. AQ3. How could analytics provide additional insight into financial information beyond calculating balances? Analytics provide valuable details and insights about an organization’s financial performance as well as identifying patterns and relationships that can drive decision-making and improve the overall performance of the company. Analytics can also be used to significantly improve many of the common, repetitive tasks associated with accounting procedures, especially around the steps needed to close the books every period. Analytics can help identify trends in financial data over time, such as revenue growth, expense patterns, and profitability trends. By visualizing these trends through graphs or charts, management can gain a deeper understanding of the financial performance of the business and make informed decisions. Analytics also enables comparisons of financial data across different business units, periods or competitors allowing management to identify areas of strength or weakness and develop strategies to improve performance. Predictive analytics techniques, such as regression analysis or time series forecasting, can be used to forecast future financial outcomes based on historical data and relevant variables. QS1 Part 1 Objective Questions QQ1. What are the total sales orders for November? Total sales for November are $41,626.19. QQ2. Which day had the highest sales order amount in November? Day 2 had the highest sales order amount in November. QQ3. Which customer did the company sell the most to in November? The company sold the most to customer “Harley Zimmerman” for the month of November. QQ4. How much did the company sell to that customer in November? The company sold $2,343.05 to that customer in November. QQ5. What is the value of the oldest outstanding invoice in November? The oldest outstanding invoice’s value in November is $392.09. QQ6. What is the age of the oldest invoice outstanding invoice? The age of the oldest outstanding invoice is 29 days.

QQ7. What is the current days sales outstanding KPI value for 2020? The current days sales outstanding KPI value for 2020 is 25.98. QS1 Part 2 Analysis Questions AQ1. Why are some dates missing in the sales by date visualization? The dates that are missing in the sales by date visualization are the days where no sales orders were made. AQ2. Some of the accounts may have a negative age. Is this an error? What might explain this? No, it is not an error. The negative numbers are the numbers of days that the invoice has been overdue for as of the AR by Customer report date of December 31, 2020. AQ3. What does the days sales outstanding KPI tell managers in general terms? The days sales outstanding KPI provides managers insights into the efficient of their accounts receivable management processes. In general terms, it tells managers the average number of days it takes for a company to collect payment from its customers. AQ4. What risks are present if you take too long to collect accounts receivable? Delayed collection of accounts receivable can result in cash flow problems as the company might not have sufficient funds to covers for its operating expenses and debt obligations. To compensate for funds shortages the company might need to resort to external financing which might result in higher borrowing costs due to interest expenses and financing fees. Longer collection periods also increase the risk of non-payment or default by customers which will eventually result in bad debts and write-offs, negatively impacting profitability. Lastly, prolonged accounts receivable collections cycle can distort financial metrics and ratios, the accuracy and reliability of financial reporting. AQ5. What are some analyses you could perform that would provide insight into how efficiency your company is collecting cash from customers? Are there any KPIs that would be appropriate here? Some KPI’s that would be appropriate in providing insight into how efficiently the company is collecting cash from customers would be:  Days Sales Outstanding (DSO): DSO measures the average number of days it takes for a company to collect money following a sale.

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 Aging of Accounts Receivable: Analyzing the aging of accounts receivable helps identify overdue invoices and assess the effectiveness of collections efforts.  Cash Flow Forecasting Accuracy: The efficacy of cash management and collections forecasting procedures can be determined by comparing the accuracy of cash flow forecasts to actual cash collections.  Customer Payment Behavior Analysis: Finding trends and opportunities for process improvement in collections can be achieved by examining customer payment behaviours, such as the frequency of late payments, average payment delays, and adherence to credit terms.  AQ6. In your opinion, what would be an appropriate benchmark for the average number of days sales outstanding (i.e., Accounts receivable/Sales x 365)? Would management want this number higher or lower? The right benchmark for the average number of Days Sales Outstanding (DSO) might change based on a number of variables, including market trends, customer base, business model, and industry standards. An average of 30 days would be a suitable benchmark, the management would want this number to be lower since that would be the average number of days it takes for the company to convert accounts receivable into cash. QS1 Part 3 Objective Questions QQ1. Which orders were created after shipment? QQ2. How many orders have been shipped but not yet received? QS1 Part 3 Analysis Questions AQ1. How do you know some orders were created after shipment? AQ1. Of the shipped orders without an invoice, which one is the most problematic? Why? AQ2. Why aren’t the other shipped orders without an invoice suspicious? AQ3. While you still have your auditor hat on, what are some additional analyses you could perform to understand whether the process or processes are being followed or controls are functioning properly? AQ4. Under what circumstances might a delivery take place before a sales order? Should this happen? AQ5. What types of controls would prevent the system from skipping a process or step?