If a transaction is recorded in the Journal Proper, which of the following is the most likely scenario?
A. Cash payment of wages
B. Credit purchase of trading goods
C. Cash sale of old furniture
D. Credit purchase of machinery for business use
Answer: Option D
Solution (By JKSSB Mock Tests)
Credit purchases of assets (like machinery) do not go into the Purchases Book (which is only for trading goods) or Cash Book (as it's a credit transaction). They are recorded in the Journal Proper.
The 'Management Override of Controls' is a risk of material misstatement due to fraud. Auditors must:
A.Test the appropriateness of journal entries, review accounting estimates for bias, and evaluate the business rationale for significant unusual transactions
Explanation:
Fictitious assets are deferred revenue expenditures (like preliminary expenses) that have no realizable value but are shown on the asset side of the balance sheet.
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