Acca aa s21 Notes

5. Cut-off: sales
Checking cut-off in sales is also important. If an item is recorded as having been sold, in other words it 
has been debited to receivables and credited to sales, it should not also appear in inventories. To 
verify this, at the stocktake the auditor would normally note down details of the last goods dispatched 
notes issued at the end of the year and perhaps the numbers of the first few issued after the year end.
If a goods dispatched note has been issued before year end then, generally speaking, we would say 
that those goods been sold and the items should be in sales and receivables. Those goods should not 
be included in inventories (even if physically still on the client’s premises because that haven’t yet 
been delivered). 
If a goods dispatched note was issued after year end then the normal assumption is that the goods 
have not been sold at year end. The item should not be in sales, should not be in receivables but if it 
hasn’t been sold, it should be counted in closing inventories.
Although shifting the saleable item from one financial year to another will alter the profits in those 
two years, what’s really important in cutoff is consistency. If something is regarded as having been 
sold at the year end it should not be counted in closing inventory; if it is not regarded as having been 
sold at the year end, it should be in closing inventory.
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Chapter 21
BANK AND CASH