Two Months Before the Year-End the Bookkeeper Erroneously Recorded the Receipt

question 24

Multiple Choice

Two months before the year-end the bookkeeper erroneously recorded the receipt of a long-term bank loan by a debit to cash and a credit to sales. Which of the following is the most effective procedure for detecting this
Type of misstatement?

• A) Analyse bank confirmation information.
• B) Analyse the notes payable journal.
• C) Prepare a year-end bank transfer schedule.
• D) Prepare a year-end bank reconciliation.

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Definitions:

Cash Dividends

Payments made by a corporation to its shareholders from its earnings in the form of cash.

Bond Restriction

Conditions or covenants included in a bond agreement that impose certain limitations on the issuer's actions.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations using its current assets.

Pension Plans

Financial programs set up to provide income to individuals during retirement, usually funded by employers or the government.