Purpose: To ascertain whether service revenue recognized during December, year 7, is complete and accurate in all material respects in relation to the financial statements taken as a whole As needed, prepare the required adjusting entry in good form (showing debits and credits) for each tick-mark Client: Griffin, Inc. Prepared by: Staff Accountant J - 1/24/2008 Service Revenue December 31, 2007 Reviewed by: Senior Auditor K - 2/2/2008 Date Customer Amount ($) Tick-marks 12/2 Slate Co. 22,000 A 12/4 Crater, Inc. 63,500 A 12/15 Globe, Inc. 50,000 C 12/16 Ash Corp. 48,750 A 12/17 Valley, LLP 32,500 X 12/23 Magnolia Corp. 22,750 X 12/27 Marble Co. 55,500 E 12/28 Delta, LLP 95,000 A 12/30 Chestnut, Inc. 75,000 B 12/30 Honeycomb Corp. 43,000 D 12/31 Globe, Inc. 75,400 A Total $ 583,400 F G/L Explanation of Tick-marks A Per review of contract, invoice, and service records, we recalculated the amount of revenue earned and verified that revenue was recognized in the correct period. B Per review of the contract and service records, service was finalized and invoiced as of December 31, 2007. Per review of ledger detail the receivable balance was recorded in unbilled receivables at year end. C Per review of the $50,000 contract and invoice, service was for the period December 15, year 7, through January 14, 2008, and should be recognized equally between 2007 and 2008 based on the terms of the contract. D Per physical inventory observation, this was a consignment sale. The product is at the customers warehouse on 12/31/2007 E Per the customer’s purchase order, the invoice payment is not due for 90 days. This product was delivered to a public warehouse and the storage fee will be paid by Griffin G/L Agreed amount to general ledger balance at December 31, 2007 F Amount foots, without exception. X Product was invoiced although there is no record of delivery/receipt by the customer
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Purpose: To ascertain whether service revenue recognized during December, year 7, is complete and accurate in all material respects in relation to the financial statements taken as a whole
As needed, prepare the required
|
Client: Griffin, Inc. |
Prepared by: Staff Accountant J - 1/24/2008 |
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|
Service Revenue December 31, 2007 |
Reviewed by: Senior Auditor K - 2/2/2008 |
||
|
Date |
Customer |
Amount ($) |
Tick-marks |
|
12/2 |
Slate Co. |
22,000 |
A |
|
12/4 |
Crater, Inc. |
63,500 |
A |
|
12/15 |
Globe, Inc. |
50,000 |
C |
|
12/16 |
Ash Corp. |
48,750 |
A |
|
12/17 |
Valley, LLP |
32,500 |
X |
|
12/23 |
Magnolia Corp. |
22,750 |
X |
|
12/27 |
Marble Co. |
55,500 |
E |
|
12/28 |
Delta, LLP |
95,000 |
A |
|
12/30 |
Chestnut, Inc. |
75,000 |
B |
|
12/30 |
Honeycomb Corp. |
43,000 |
D |
|
12/31 |
Globe, Inc. |
75,400 |
A |
|
Total |
$ 583,400 F |
G/L |
|
|
Explanation of Tick-marks |
|||
|
A |
Per review of contract, invoice, and service records, we recalculated the amount of revenue earned and verified that revenue was recognized in the correct period. |
||
|
B |
Per review of the contract and service records, service was finalized and invoiced as of December 31, 2007. Per review of ledger detail the receivable balance was recorded in unbilled receivables at year end. |
||
|
C |
Per review of the $50,000 contract and invoice, service was for the period December 15, year 7, through January 14, 2008, and should be recognized equally between 2007 and 2008 based on the terms of the contract. |
||
|
D |
Per physical inventory observation, this was a consignment sale. The product is at the customers warehouse on 12/31/2007 |
||
|
E |
Per the customer’s purchase order, the invoice payment is not due for 90 days. This product was delivered to a public warehouse and the storage fee will be paid by Griffin |
||
|
G/L |
Agreed amount to general ledger balance at December 31, 2007 |
||
|
F |
Amount foots, without exception. |
||
|
X |
Product was invoiced although there is no record of delivery/receipt by the customer |
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