Practicing CA
63 Points
Posted on 06 July 2012
In this case, we need to consider two things primarily,
1) is the transaction recorded?
2) are we entitled to use the balance which is reflected in our account.
In cut off cases, the transaction is "recorded" but "valuation" is not done on that date. The assertions to be considered as per SA 315 for account balances are cut off, validity, presentation, recording, valuation at the same time. It is a difference in opinion whether you take recording first or valuation first.
The second point to be considered is as per AS 1. The concept of 'substance over form'. In substance the transaction has taken place, but the form of the transaction is not reflected.