The chief accountant has informed you that receivables days have increased. from 45 to 60 days over the last year. The aged receivables report produced. by the computer is shown below. Number of Receivables Range of Debt Total debt Current One to two months More than two months 15 Less than $0 -88,000 -88,000 $ $ 197 0 to $20,000 2,300,000 550,000 650,000 980,000 153 20 to $50,000 5,408,300 2,050,000 2,750,000 730,000 23 $50,000 or more 1,500,000 750,300 675,000 73,000 388 9,120,300 3,262,300 4,075,000 1,783,000 In view of the deteriorating receivables situation, a direct confirmation of receivables will be performed this year. (a) State and explain the meaning of FOUR assertions that relate to the direct confirmation of receivables. b) Discuss which particular categories of receivables might be chosen for the sample by the auditor. c) Why are receivables turnover important for all businesses when reporting on their Statement Financial Position.
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.
Information on receivables
The chief accountant has informed you that receivables days have increased.
from 45 to 60 days over the last year. The aged receivables report produced.
by the computer is shown below.
|
Number of Receivables |
Range of Debt |
Total debt |
Current |
One to two months |
More than two months |
|
15 |
Less than $0 |
-88,000 |
-88,000 |
$ |
$ |
|
197 |
0 to $20,000 |
2,300,000 |
550,000 |
650,000 |
980,000 |
|
153 |
20 to $50,000 |
5,408,300 |
2,050,000 |
2,750,000 |
730,000 |
|
23 |
$50,000 or more |
1,500,000 |
750,300 |
675,000 |
73,000 |
|
388 |
|
9,120,300 |
3,262,300 |
4,075,000 |
1,783,000 |
In view of the deteriorating receivables situation, a direct confirmation of
receivables will be performed this year.
(a) State and explain the meaning of FOUR assertions that relate to the
direct confirmation of receivables.
b) Discuss which particular categories of receivables might be chosen
for the sample by the auditor.
c) Why are receivables turnover important for all businesses when reporting
on their Statement Financial Position.
NB: Please provide answer to question A, B and C
Step by step
Solved in 2 steps
