Question

The following are various management assertions (a. through m.) related to sales and accounts receivable.

a. Receivables are appropriately classified as to trade and other receivables in the financial statements and are clearly described.
b. Sales transactions have been recorded in the proper period.
c. Accounts receivable are recorded at the correct amounts.
d. Sales transactions have been recorded in the appropriate accounts.
e. All required disclosures about sales and receivables have been made.
f. All accounts receivable have been recorded.
g. Disclosures related to receivables are at the correct amounts.
h. Sales transactions have been recorded at the correct amounts.
i. Recorded accounts receivable exist.
j. Disclosures related to sales and receivables relate to the entity.
k. Recorded sales transactions have occurred.
l. There are no liens or other restrictions on accounts receivable.
m. All sales transactions have been recorded.

1. Explain the differences among management assertions about classes of transactions and events, management assertions about account balances, and management assertions about presentation and disclosure.
2. For each assertion, indicate whether it is an assertion about classes of transactions and events, an assertion about account balances, or an assertion about presentation and disclosure.
3. Indicate the name of the assertion made by management.

Answer 1

Answer:

1) The Differences among the classes of management assertions

i) Management assertions about classes of transactions and events:

This is the assertion that the income and event statement of all business transactions were recorded accurately and within the correct reporting period.

ii) Management assertions about account balances:

This is the assertion that the account statement of all business transactions were accurately reported without error and within the correct reporting period.

iii) Management assertions about presentation and disclosure:

The is the assertion that the information presented within the financial statements are appropriately presented and disclosed.

2&3) The assertion classes and the name of assertion for each of the assertions made by the by  the management

a. Receivables are appropriately classified as to trade and other receivables in the financial statements and are clearly described.

Assertion class: presentation and disclosure

Name of assertion: Understandability

b. Sales transactions have been recorded in the proper period.

Assertion class: Transactions and events

Name of assertion: Cutoff

c. Accounts receivable are recorded at the correct amounts.

Assertion class: Account balances

Name of assertion: Valuation

d. Sales transactions have been recorded in the appropriate accounts.

Assertion class: Transaction and events

Name of assertion: Classification

e. All required disclosures about sales and receivables have been made.

Assertion class: Presentation and disclosure

Name of assertion: completeness

f. All accounts receivable have been recorded.

Assertion class: Account balances

Name of assertion: Existence

g. Disclosures related to receivables are at the correct amounts.

Assertion class: Presentation and disclosure

Name of assertion: Accuracy

h. Sales transactions have been recorded at the correct amounts.

Assertion class: Transaction and events

Name of assertion: Accuracy

i. Recorded accounts receivable exist.

Assertion class: Account balances

Name of assertion: Existence

j. Disclosures related to sales and receivables relate to the entity.

Assertion class: Presentation and disclosure

Name of assertion: Occurrence

k. Recorded sales transactions have occurred.

Assertion class: Transactions and events

Name of assertion: Occurrence

l. There are no liens or other restrictions on accounts receivable.

Assertion class: Account balance s

Name of assertion: Rights and obligations

m. All sales transactions have been recorded.

Assertion class: Transaction and events

Name of assertion: Occurrence

Answer 2

The question is about the assertions its class and name of assertions.

Management Assertions about Class of transactions is to confirm that correct accounting heads were used to allocate the transactions.

Management Assertions about Account Balances is to confirm that all accounting transactions are recorded in the correct relevant period.

Management Assertions about Presentation and Disclosure is to confirm that relevant information is appropriately communicated to the users of Financial Statements.

A. Class: Presentation and Disclosure

Name: Understandability

B. Class: Transactions and events

Name: Cutoff

C. Class: Accounts Balances

Name: Calculation

D. Class: Transactions and Events

Name: Classification

E. Class: Presentation and Disclosure

Name: Completeness

F. Class: Accounts Balances

Name: Existence

G. Class: Presentation and Disclosure

Name: Accuracy

H. Class: Transaction and Event

Name: Accuracy

I. Class: Accounts Balances

Name: Existence

J. Class: Presentation and Disclosure

Name: Existence

K. Class: Transaction and Events

Name: Occurrence

L. Class: Account Balances

Name: Rights and Obligation

M. Class: Transaction and Events

Name: Completeness

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