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What is NOT true about cut-off?
A Last goods received note will determine the last invoice appearing in receivables
B It determines where one period ends and another one starts
C Details should be taken at the inventory count
D It is a good way to manipulate the financial statements
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The following is a set of instructions for the year end physical inventory count at a manufacturer. Production is to continue on the day of the year end count.
Counting is to be carried out by staff from the warehouse and the accounts department. Counters are to report at 8am on 30 June to the warehouse manager.
The warehouse manager will issue sequentially numbered inventory sheets which will include pre-printed descriptions of the inventory lines and the quantities supplied by the inventory controller.
The count area is to be divided into sections and each will be allocated a section by the warehouse manager. Items are to be marked once counted.
The production manager will estimate the materials required for use in production on the day and ensure that they are taken out of the warehouse and moved to the production department.
Goods to be despatched on the day are to be taken out of the warehouse before counting commences and labelled accordingly. Any items not despatched at the end of the day will be included in inventory. The number of the last despatch note will be recorded by the warehouse manager.
Any emergency requisitions of raw materials are to be reported to the warehouse manager.
Damaged inventory is to be noted as such on the inventory sheets.
Any discrepancies between physical and book inventory will be referred to the warehouse manager.
All inventory sheets are to be signed by the counter and returned to the warehouse manager at the end of the count. The warehouse manager will check the numerical sequence of the inventory sheets.
Required
Identify the strengths and the weaknesses of the above instructions, explaining clearly their significance.
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