Acca aa s21 Notes

September 2021 to June 2022 exams
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Disagreements, which may be due to timing differences or errors (the client's or the customer's), will 
need to be reconciled. Timing differences arising at the confirmation date may include:
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Cash-in-transit (ie payments by customers not received by the client);
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Goods-in-transit (ie goods sent and invoiced by the client not received/recorded by the 
customer).
If some of the client’s customers don’t reply, then it’s normal for the auditor to follow-up the original 
request with an additional request. If the auditor is really worried about the balance for which there is 
no confirmation received, the auditor might, as a last resort, phone that customer. However this can 
only be done with the client’s permission, to avoid damaging the relationship between client and 
customer.
3. Other work on receivables
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Reconcile the sum of the balances on the receivables ledger to the balance on the receivables 
ledger control account. The individual balances represent the individual assets and they have to 
be reflected in the control account which in turn is what appears in the financial statements.
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Aged listings. These are essential for receivable valuations. The older the debt, the greater the 
risk of non-payment. A general allowance for irrecoverable debts is calculated based on the age 
of the debts (e.g. increasing percentages applied to balances more than 30/60/90/120 days 
overdue).
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Correspondence with customers should be scrutinised. It may become clear that a customer 
disputes an invoice and it will be difficult ever to receive that amount of money; they might be 
denying the goods were received; they might be disputing the quality of the goods.
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Scrutiny of board minutes. Large receivables which look as though they might be going bad 
should be reflected in board discussions and there should be records of that in the board 
minutes.
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Collection period, that is a number of days' sales in receivables. It is calculated as receivables 
divided by sales per day. It is usually regarded as an indicator of the recoverability of receivables 
and also the efficiency of the credit control operation. There may, of course, be good reasons 
why the collection period increases: the company might have extended credit terms to be 
competitive or it may be making a greater proportion of sales abroad where usually the 
collection period is longer. But all other things being equal, an increase in the collection period 
is usually regarded as bad news.
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On a test basis, trace items outstanding on customer’s accounts to the copy invoice, copy 
dispatch note and order received from the customer. This provides evidence that the amount is 
a genuine receivable. 
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On a test basis, test recent orders in the order file to dispatch notes and to copy invoices and to 
the receivable ledger to obtain evidence of completeness of amount owing.
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Trace amounts showing as having been paid in customers’ accounts to cash book Dr entries to 
verify that they have indeed been paid and should not be in receivables.
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Examine after-date cash receipts. An absolute proof that a receivable is good is if it is received 
after year end. If an amount is not received maybe after two or three months, then there may be 
serious doubt as to the recoverability of that amount against which a specific allowance should 
be made for irrecoverability.