Question

On the last day of the fiscal year, a co-worker asks you to cut a check for $2,000 as a miscellaneous expense for supplies in order to complete a project for a VIP customer today. You notice the invoice looks a little different from other invoices that are usually processed. You know that by preparing the closing entries tomorrow, the miscellaneous expense will be set to zero for the beginning of the year.

1. Should you write this check today and record the expense or write the check tomorrow?
2. How would the company be affected if the check is written and the invoice ends up being erroneous?
3. What are the four closing journal entries? Why are these necessary?

Answer 1

1:- No.you should not write the check and record an expenses today,due to the following reasons. The invoice looks different from other invoices that are usually processed and indicates sign of any misrepresentation or fraud. . Miscellaneous expenses will be set to zero the next day,which means this expenses account would be closed without further verification.

This individual should provide the information to a supervisor to verify the authentication on this.

2:- if the invoice turnover should be erroneous then the amount payable on account of miscellaneous expenses will become zero and accordingly it will reduce the current liability balance and show a distributed and bounded picture of its current ratio,quick ratio etc.

Accordingly we should not write the check make become secure to write it tomorrow .The company could be affected in the following ways....Loss of money , reputational harm.