Bank Reconciliation

Is actually bank reconciliation prepared by an account executive viewed as a control within the financial preparation approach?

The response to this query is quite ambiguous. As you will discover threat that Account Executive set aside one particular balancing figure, so as to tally the complete reconciling items. Therefore, preparing of bank reconciliation itself will not type aspect with the control. On the other hand, if you will discover a superior assessment the bank reconciliation prepared, the above-mentioned threats is often mitigated.

Therefore, examining bank reconciliation is viewed as a control.

Tax Refund

What will be the accounting entries for tax refund?


Debitt        Provision for Taxation
Credit        Taxation Expense (P/L)
Getting recognition of tax refund in Profit & Loss statement (upon finalization of YA)


Debit        Cash
Credit       Provision for Taxation (B/S)
Getting recognition of tax refund receipt

As observed above, a tax refund is offset against the taxation recorded in P/L ( as evident from crediting taxation). Be observed that, a tax refund is prospective showing that the tax calculation is at its final stage ( more or less finalized). As a result, any excess provision based on the particular Year of Assessment should be re-assessed / reversed out appropriately.

General Provision on Doubtful Debt

In some situations, general provision for doubtful debt is offered for accoridng for the age with the outstanding debt. Even so, General provision for doubtful receivable is no longer permitted subsequent for the implementation of IAS 39.

IAS 39 states that:

“A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.”

As such, impairment loss really should be recognized when, subsequent for the initial recognition with the receivable, an event has occurred which causes the receivable to become impaired. General provision offered in accordance with age with the outstanding is no longer permitted. The financial asset really should be impaired if, and only if, there is certainly objective proof of impairment.

What will be the accounting entries for fixed asset acquisition:

Debit    Fixed Asset
Credit   Cash / Creditors
     Being fixed asset purchased

What in the event the fixed asset acquisition is financed by means of Hire Purchase Employee, what will be the entries in that case:

Debit    Fixed Asset
Credit   Creditors

Debit   Creditors
Credit       Hire Purchase Liability

Implication of Internal Control- Effect of Credit Crunch on New Clients

Within the existing environment exactly where credit crunch influences are predominant, you will discover escalating credit dangers with the Firm. Together with the enthusiasm to get new clients, the strict credit threat assessments ( of new clients) really should not be compromised.

The company ( that happen to be straight and severely impacted by the credit crunch) really should examine creditworthiness of new clients cautiously. Comprehensive facts necessary to become obtained, as an illustration:

• Financial benefits with the Firm
• Inquiries with market place peers/ industrial individual
• Shareholders' fund with the Firm
• Causes for buying in the entity

The business can go over together with the new client around the explanation to buy from them, because the supplies client could have already been discontinued from other supplies, resulting from credit threat concern.

Therefore, a comprehensive understanding and suitable approval approach must be undertaken to stop doubtful debt concern.

Stock Take Process 4

Appropriate segregation of duties ought to exist through stocktake.

Being an auditor, we will need to observe that the stock take group consist of:

• Counter (Warehouse personnel)
• Checker (Staffs from department besides warehouse division

Warehouse personnels will be the those who has direct access for the Company's stocks. Why really should the warehouse personnel (counter) accompanied using a checker through stock take? That is to stop prospective fraud case and observe the standard inventory management procedures with the client. Warehouse personnel will be the those who has day-to-day access for the warehouse. Assuming, they steal one particular and reported a single stock lesser through stock take, no one is not going to recognize the fraud case, unless the inventory method capture the each day movement.

To illustrate with an instance. Corporation XYZ will not has right inventory system that retain track on goods in and goods issued. The Corporation is not going to know the precise quantity with the inventory item, till the physical stock take, which can be performed on a month-to-month basis. The employee could have just steal one particular item and  letting persons recognize.

Therefore, stock take group ought to consist of no less than one particular individuals from other division to verify that the quantity counted and reported is as what have already been counted physically.