A procedure to test for a cash receipts cutoff error is
A) reconciling the bank statement.
B) performing a four-column proof-of-cash.
C) observing the counting of cash at the balance sheet date.
D) tracing recorded cash receipts to subsequent period bank deposits on the bank statement.

Question

Quizplus · Accepted Answer

A cash receipts cutoff error occurs when cash receipts are recorded in the wrong period. To test for this error, one can trace recorded cash receipts to subsequent period bank deposits on the bank statement. This will determine if any receipts were recorded in the wrong period by comparing the dates of the receipts to the dates they were deposited in the bank. The other choices may be accounting procedures, but they do not specifically test for a cash receipts cutoff error.

A Procedure to Test for a Cash Receipts Cutoff Error