Question

On the last day of the fiscal year, Stanley Carpenter comes to you for a favor. He asks that you enter a check for $2,000 to CD Company for Miscellaneous Expense. You notice the invoice looks a little different from other invoices that are processed. Stanley needs the check immediately to get supplies today to complete the project for a favorite customer. You know that by preparing the closing entries tomorrow, Miscellaneous Expense will be set to zero for the beginning of the new year.

Should you write this check and record the expense or find an excuse to write the check tomorrow? What would be the effect if the invoice to CD Company was erroneous and you had written the check?

Answer 1

"I will not write the check, as at last day of fiscal year, many parties try to manipulate accounts by entering fake vouchers. Also, you are already doubfull of its reliability.

Plus auditiors also focus on the year end entries as they are materially more probable to be altered/faked.

If you have entered this erroneous check than the miscellaneous expenses will increase by the same amount & thus decreasing the profit by sale amount.

You may then be needed to pass a prior period adjustment in next year.

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