Question

Mention analytical procedure ratio related to inventory and payment cycle

Answer 1

"Analytical procedures are a vital part of the audit process and include evaluations of monetary information made by a study of plausible relationships among both financial and non-financial data. And analytical procedures range from simple comparisons to the utilization of complex models involving many relationships and elements of knowledge.

Analytical procedures examples see procedures that may indicate possible problems with the financial records of a client, which may then be investigated more thoroughly. Analytical procedures in audit planning involve comparisons of various sets of economic and operational information to work out if historical relationships are continuing forward into the amount under review. In most cases, these relationships should remain consistent over time. If not, financial records is also incorrect possibly thanks to errors or fraudulent reporting activity.

The Acquisition and Payment Cycle (also stated because the PPP Cycle for Purchases, Payables, and Payments) is principally comprised of two classes of transactions. the primary class is that the acquisition class. the everyday journal entry for this class of transactions may be a debit to inventory or an expense and a credit to accounts payable. The classification assertion is extremely important during this scenario because there are many possible debits that may fulfill the journal entry.

The second class of transactions within the acquisition and payment cycle is that the cash disbursements class. the everyday journal entry for this class is just a debit to accounts payable and a credit to cash. All in all, this cycle is principally about incurring payables and paying off those payables with cash.