A manager of a firm signs an agreement with a vendor. He agrees to pay $20,000 f

Question

A manager of a firm signs an agreement with a vendor. He agrees to pay $20,000 for ads running during the month of January. On January 25th, he receives the bill for $20,000, and it%u2019s still sitting on his desk on January 31st. Class, let%u2019s say that we were examining the accounting records for a client. We see several cash transactions on the bank statement for $5,000. The owner explains that these transactions were to pay a vendor. However, there is no purchase order or vendor invoice. How should we proceed?

Explanation / Answer

20,000$ should be accounted for prepaid advertisements

when he recieve a bill he should transfer the cash debit to payable credit

we will check whether it is accounted in prepaid advertisements

if there is some entry thats good

other wise its fraud

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