Question

Lost in Transportation Yale Express, a short-haul trucking firm, turned over much of

its cargo to local truckers to complete deliveries. Yale collected the entire delivery charge. When billed by the local trucker, Yale sent payment for the final phase to the local trucker. Yale used a cutoff period of 20 days into the next accounting period in making its adjusting entries for accrued liabilities. That is, it waited 20 days to receive the local truckers’ bills to determine the amount of the unpaid but incurred delivery charges as of the balance sheet date. On the other hand, Republic Carloading, a nationwide, long-distance freight forwarder, frequently did not receive transportation bills from truckers to whom it passed on cargo until months after the year-end. In making its year-end adjusting entries, Republic waited for months in order to include all of these outstanding transportation bills. When Yale Express merged with Republic Carloading, Yale’s vice president employed the 20-day cutoff procedure for both firms. As a result, millions of dollars of The Republic’s accrued transportation bills went unrecorded. When the company detected the error and made correcting entries, these and other errors changed the reported profit of $1.14 million into a loss of $1.88 million! What might Yale Express’s vice president have done to produce more accurate financial statements without waiting months for the Republic’s outstanding transportation bills?

Answer 1

To produce more accurate financial statements without waiting for the Republic's outstanding transportation bills, Yale Express's vice president could have implemented a more frequent and proactive system for tracking and recording these accrued liabilities. This might involve establishing a more efficient communication and documentation process with the local truckers and implementing a more timely billing and payment system. Additionally, employing advanced accounting software that can provide real-time tracking of invoices and expenses could help ensure that accrued liabilities are accurately recorded and accounted for in the financial statements.