Question

Which of the following statements describe the occurrence objective for internal controls over the purchases and payables cycle?

A. All purchases transactions that occurred during the period have been recorded.

B. Accrued payroll liabilities are liabilities of the entity at the end of the period.

C. Purchase invoices are properly recorded.

D. All cash payments are recorded in the correct period.

E. Utilities expenses are recorded in the correct accounts.

F. Invoices are received for goods not ordered.

G. Fictitious payable invoices may be recorded.

Answer 1

Internal Contorls of Purchases and payable cylcles: It has Internal contorols such as follows ,

Classification: It determines whether the transactions are recorded into correct accounts or not

Completeness: To check whether all the transactions are recorded completely without any missing.

Cut Off: To make sure that the transactions are recoded correctly in the given period

Occuurence: It determines whether the transaction has been actually ccurred and whether all the specific documents of the purchase are actually there.

Existence: To check if the assets such as inventory is actually existed as per the records.

Rights and Obligation: To see if the assets are actually owned by the company .

Valuation: To make sure that the inventories recorded in the books are at fair market price

A. All purchases transactions that occurred during the period have been recorded.

This comes under Occurrence as it speaks about whether the occurred transactions are recorded.

B. Accrued payroll liabilities are liabilities of the entity at the end of the period.

This relates to Cut off as it tells about the transactions to record at the end of the period.

C. Purchase invoices are properly recorded.

This comes under completeness as it speaks about whether the transactions are recorded

D. All cash payments are recorded in the correct period.

This is cut off related internal control which speaks about to record in the correct period

E. Utilities expenses are recorded in the correct accounts.

A classification related internal control to record the transactions under correct accounts

F. Invoices are received for goods not ordered.

This relates to occurance which checks whether the invoice are received for the actual goods received

G. Fictitious payable invoices may be recorded.

It does not comes under Occurance as it does not tells anything that had actually occurred.