Question

A likely analytical procedure to test the accuracy of purchase discounts would be to compute the ratio of cash discounts earned to:

Answer 1

A likely analytical procedure to test the accuracy of purchase discounts would be to compute the ratio of cash discounts earned to : Purchase

What is Purchase Discount?

Purchase discount is deducted to the total purchases when computing for the net purchases. This account has a normal balance of credit and decreases the total amount of cost of goods sold.

What is Analytical procedures ?

Analytical procedures refer to study of significant ratios and past trends and investigating unusual fluctuations.

Under analytical review procedures, an auditor compares financial information of the current period with those of the previous periods, applying techniques of ratio analysis and investigating the causes of unusual fluctuations and deviations.

Therefore, we can conclude that the correct option is C.

Your question is incomplete, but most probably your full question was:

A likely analytical procedure to test the accuracy of purchase discounts would be to compute the ratio of cash discounts earned to:

a. accounts payable

b. notes payable

c. purchases

d. sales discounts

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