RUTGERS Acquisitions and Expenditures . What are acquisitions and expenditures?
ID: 2573337 • Letter: R
Question
RUTGERS Acquisitions and Expenditures . What are acquisitions and expenditures? What accounts are in this cycle? What is another name for this cycle? What are the inherent risks associated with this cycle? What happens when you improperly capitalize expenditures? Discuss the FASB statement Concepts 3 ways to recognize expenses Discuss each of the basic acquisition and expenditure activities AND describe the type of transactions involved in each activity - Be sure to explain the bill of lading, voucher, voucher package (3 way match), receiving report, etc Discuss why the purchasing process is important to an organization Consider and discuss how expenses affect this process Rutgers Business School Newark and New BrunswichkExplanation / Answer
Dear Student,
(A) Acquisitions and Expenditure refers to the cycle starting from acquiring/purchasing goods and services and paying for these purchase either through instant cash or through creating initial payables and then making payment;
(B) Accounts involved in this cycle are Purchase A/c, Payable/liabilities A/c, Cash / Bank A/c, Inventory A/c, Fixed Assets A/c i.e generally long term assets / payable accounts;
(C) This cycle may also be termed as Purchase Cycle;
(D) Inherent Risks associated with this cycle involves:
(i) Capitalisation of expenses i.e an expense should have been charged to Income Statement but shown under Assets in Balance Sheet;
(ii) Unrecorded liabilities until PO and invoices are not matched;
When expenditures are wrongly capitalised then we are presenting the wrong profitability situation due to high profit as amount has not been expensed and high value of Assets as amount wrongly capitalised ;
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Regards,
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