Question

Which accounts should be confirmed with outside sources? Briefly describe from whom they should be confirmed and the information that should be confirmed.

a) Inventory - Confirmations should be obtained from suppliers to validate the accuracy of the quantities and valuation of goods on hand.
b) Property, Plant, and Equipment - Confirmations should be obtained from appraisers to verify the fair market value of tangible assets.
c) Trade Accounts Receivable - Confirmations should be obtained from customers, verifying the accuracy of outstanding balances and payment terms.
d) Accrued Liabilities - Confirmations should be obtained from creditors to verify the accuracy of outstanding obligations and terms of payment.

Answer 1

Accounts to be confirmed with outside sources include Inventory (by suppliers), Trade Accounts Receivable (by customers), and Accrued Liabilities (by creditors), to ensure the accuracy of financial records.

Step-by-step explanation:

Certain accounts should be confirmed with outside sources to ensure the accuracy of financial records:

• Inventory - Confirmations should be obtained from suppliers to validate the accuracy of the quantities and valuation of goods on hand. This ensures that the company's records match the physical inventory and the amounts owed to suppliers.
• Property, Plant, and Equipment - While having appraisals is useful, typically confirmations for these assets are not obtained from external parties. Instead, historical cost and any subsequent adjustments are recorded based on internal documents and depreciation policies.
• Trade Accounts Receivable - Confirmations should be obtained from customers, verifying the accuracy of outstanding balances and payment terms. This process, often conducted through positive or negative confirmation requests, helps to ensure that the amounts that customers acknowledge they owe match the company's records.
• Accrued Liabilities - Confirmations should be obtained from creditors, including service providers and suppliers for expenses incurred but not yet paid, to verify the accuracy of outstanding obligations and terms of payment. It helps to assure that all liabilities are accounted for and accurately presented in the financial statements.