Revenue And Expenditure Cycle

Question 1

Sales - transaction

Recognize sale when performance obligation is met

Answer 1

Occurrence

Inspect delivery note for date of delivery

Question 2

Sales - transaction

Amount is P x Q

Answer 2

Accuracy

Agree price to price list to verify VAT is not included

Agree to price list to verify price

Reperform calculation

Question 3

Sales - transaction

Sales around year in are recorded properly

Answer 3

Cut off

Obtain samples of YE delivery notes and inspect sales journal for evidence of correct recording

Question 4

Sales - transaction

Amounts have been added up properly

Answer 4

Accuracy

Agree invoice to sales journal

Question 5

Sales - transaction

Correct amount is posted to GL

Answer 5

Accuracy

Agree by inspection, sales journal to GL

Question 6

Financial statements

Revenue is shown properly

Answer 6

Presentation and disclosure

Inspect AFS for evidence of compliance

Question 7

Trade Receivables - Balance

Initial recognition

Debtors are real

Answer 7

Existence

Perform debtors circularisation - positive or negative tests

Look at outstanding debtors at YE and inspect bank statement to see if they have settled

Question 8

Trade Receivables - Balance

Initial recognition

Control of debtors

Answer 8

Rights

Inquire with management

Bank confirmation

Inspect board minutes

Question 9

Trade Receivables - Balance

Initial recognition

Closing balance

Answer 9

Valuation

Agree sales journal, creditors journal and last years TB to TR balance

Question 10

Trade Receivables - Balance

Subsequent measurement

Debtors age analysis is correct before use

Answer 10

Accuracy

Cast

Recalculate totals

Question 11

Trade Receivables - Balance

Subsequent measurement

Impairment

Answer 11

Valuation

Debtors age analysis

Letters of confirmation

Question 12

Trade Receivables - Balance

Subsequent measurement

Correct A4DD amount (% x debtors)

Answer 12

Accuracy

Reperform calculation, compare to last year

Inquire with management if % is reasonable

Agree debtors amount used with trial balance

Question 13

Trade Receivables - Balance

Financial statements

Debtors recorded ito IFRS

Answer 13

Presentation and disclosure

Inspect AFS for evidence of compliance

Question 14

Trade Receivables - Balance

Financial Statements

Debtors are recognized properly - (risk: debtors are actually creditors)

Answer 14

Presentation and disclosure

Inspect accounts receivable for debtors with credit balances

Question 15

Trade Receivables - Balance

Financial Statements

All debtors are recognised

Answer 15

Completeness

Cut off testing

Question 16

Trade payables - balance

Subsequent measurement

Trade payable recorded at the correct amount

Answer 16

Valuation

Inspect TP general ledger and agree to bank line items and agree to other ledgers

Recalculate balances

Question 17

Trade payables - balance

Subsequent measurement

Creditors exist and at correct amount

Answer 17

Existence
Confirmation letter

Valuation
Inspect creditor list and agree to creditor statement to see existence and at correct amount

Question 18

Trade payables - balance

Subsequent measurement

Recognised in the correct period.

Answer 18

Completeness

Look at material payments, inquire the nature of the payments from management, inspect bank statements, agree all to the accounting records