The following misstatements are sometimes found in the sales and collection cycle’s account balances: a. Cash received from collections of accounts receivable in the subsequent period is recorded as current period receipts. b. The allowance for uncollectible accounts is inadequate because of the client’s failure to reflect depressed economic conditions in the allowance. c. Several accounts receivable are in dispute as a result of claims of defective merchandise d. The pledging of accounts receivable to the bank for a loan is not disclosed in the financial statements. e. Goods shipped and included in the current period sales were returned in the subsequent period. f. Several accounts receivable in the accounts receivable master file are not included in the aged trial balance. g. One account receivable in the accounts receivable master file is included on the aged trial balance twice. h. Long-term interest-bearing notes receivable from affiliated companies are included in accounts receivable. i. The trial balance total does not equal the amount in the general ledger. Required: For each misstatement, list an internal control that should prevent it.

Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter9: Accounting For Receivables
Section: Chapter Questions
Problem 9MC: Which method delays recognition of bad debt until the specific customer accounts receivable is...
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The following misstatements are sometimes found in the sales and collection cycle’s account balances:
a. Cash received from collections of accounts receivable in the subsequent period is recorded as current period receipts.
b. The allowance for uncollectible accounts is inadequate because of the client’s failure to reflect depressed economic conditions in the allowance.
c. Several accounts receivable are in dispute as a result of claims of defective merchandise
d. The pledging of accounts receivable to the bank for a loan is not disclosed in the financial statements.
e. Goods shipped and included in the current period sales were returned in the subsequent period.
f. Several accounts receivable in the accounts receivable master file are not included in the aged trial balance.
g. One account receivable in the accounts receivable master file is included on the aged trial balance twice.

h. Long-term interest-bearing notes receivable from affiliated companies are included in accounts receivable.
i. The trial balance total does not equal the amount in the general ledger.

Required: For each misstatement, list an internal control that should prevent
it.

 
 
 
 
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