Question

A federal agency received a separate appropriation for supplies. A large number of purchase orders marked "Rush" are processed in August. Because several clerks are on vacation, they are not recorded as obligation. The supplies are received in early September , before the end of the fiscal year . After matching the invoice with the receiving report, the accountant finds that the agency has insufficient funds to process many of the payment . On further inquiry, the accountant locates the batch of unrecorded purchase order. He also finds that the supplies were used immediately upon receipt. He explain this problem to his boss. The boss replied " Forget it, just charge these bills to next year's appropriation". Explain the nature of the accountant dilemma and discuss what you think the accountant should do ?

please provide the refrences that you have used to answer this question

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( just for informatio this question hold 10 marks )

Answer 1

Answer -

BOSS is wrong in this case. It is unethical and non compliance of accrual concept of accounting principles to wrongly charge invoices in next year.

Purchase items are already been consumed for making selling product.

Accountant should record the purchases in the year in which they accrued as per accrual principal and Matching principal.

Accountant should discuss the matter with boss and he should explained him the fault side of charginng the invoices next year.

Invoices comes with the sales tax also. Non recording of sales tax in the year of purchases can alert the sales tax department.

Hence, He should discuss the matter with his boss

References - Accrual concept Theory