Bookkeepers keep the Accounting Book (day-to-day normal Account Receivable/ Account Payable entries)
Accountant review the work done by bookkeepers and prepare non-recurring journal (e.g. provision for doubtful debt)
Financial controller reviews the work done by Accountant and oversees the financial statement.
CFO oversees and monitors the finance function and ensures the smooth flow of company’s financing.
Wednesday, April 9, 2008
Tuesday, March 25, 2008
#40 Audit for Inventory Valuation
As mentioned in post #39, stocks should be valued at lower of its cost or net realizable value. This has posted a imperative audit work step: to ascertain that the respective items is value at cost or net realizable value (Note: each Respective items have to be valued at cost or net realizable value).
How do we ensure that the stocks are valued properly?
1. Randomly selected a certain number from inventory listing.
2. To find out the most recent sales/ subsequent sales after year end. (general guide: 3 months)
3. From the invoices, noted down selling price.
4. Compare the selling price to the actual cost of the sample.
5. Cost > Selling Price, valued at selling price
Selling Price > Cost, valued at cost.
How do we ensure that the stocks are valued properly?
1. Randomly selected a certain number from inventory listing.
2. To find out the most recent sales/ subsequent sales after year end. (general guide: 3 months)
3. From the invoices, noted down selling price.
4. Compare the selling price to the actual cost of the sample.
5. Cost > Selling Price, valued at selling price
Selling Price > Cost, valued at cost.
Wednesday, March 19, 2008
#39 Inventory Valuation (anwer to #38)
Inventory items have to be revalued at ‘lower of cost or net realizable value’. Practically, net realizable value means the amount at which the Company could sell in an open market (selling price).
To answer the question post in #38
1) Value at cost of $2.00. ( as cost of $2.00 is lower than its net realizable value of $2.50)
2) Value at Net realizable value of $1.50 ( as cost of $1.50 is lower than its cost of $2.00)
To answer the question post in #38
1) Value at cost of $2.00. ( as cost of $2.00 is lower than its net realizable value of $2.50)
2) Value at Net realizable value of $1.50 ( as cost of $1.50 is lower than its cost of $2.00)
#38 Accounting for Discount on Prompt Payment
The accounting for prompt payment discounts depends on the nature of the discount. If the prompt payment discount is effectively part of normal trade rebates, i.e. generally everyone receives them, whether they pay promptly or not, they should be accounted as a deduction from the cost of inventory rather than as finance income.
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