cut off procedure
Prazu Shrestha (36 Points)
04 July 2018
isn't recognizing expenses as prepaid , outstanding imply applying cut off procedures?? if not,why??
1 Replies
Dineshchandan
(articled assistant)
(84 Points)
Replied 04 July 2018
Recording Prepaid and Outstanding in itself wont amount to applying cutoff procedures. Prepaid is recorded due to matching priciple (i.e. to match the expense for period during which service was received) and Outstanding is for accrual concept.
Cutoff procedure is a procedure to be performed at a particular point of time. Prepaid and outstanding shall be recorded through out the period as against cutoff which needs to be ensured at a particular point of time.
To give an example, an expense which is not accrued (hence not outstanding), needs to be recorded in books by applying cutoff procedures at the period end. Hence recording outstandings wont give comfort over cutoff.
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