Question

On the last day of the fiscal year, a co-worker asks you to cut a check for $2,000 as a miscellaneous expense for supplies in order to complete a project for a VIP customer today. You notice the invoice looks a little different from other invoices that are usually processed. You know that by preparing the closing entries tomorrow, the miscellaneous expense will be set to zero for the beginning of the year. Should you write this check today and record the expense or write the check tomorrow? How would the company be affected if the check is written and the invoice ends up being erroneous?

Answer 1

Answer:

A. No, Should not in any way write the check today and neither record the expense or even write the check tomorrow.

B. The company will be affected if the check

was cut today and the expense was not recorded, which means that the net income of the current fiscal year will be increased by the amount of $2,000 while the net income of the next year will be reduced by the amount of $2,000 and this tend to happens due to some error.

Step-by-step explanation:

A. Based on accounting principle every debit entry must have a corresponding credit entry which means that in a situation where a check is been cut today for miscellaneous expense and for supplies the Miscellaneous expense account should be debited while the bank account should as well be credited based on the double entry principle because if not so the current year net income will wrongly shows and be higher with the amount of $2,000.

B. In a situation where the check was cut today and expense was recorded the following day or tomorrow it means that the current year financial statement net income will be increased by the amount of $2,000 while the amount shown in the balance sheet will decreased by the amount of $2,000.

Therefore I can issue a check today and as well record the expense the same day in which the check was issued.