Which P&L assertion addresses whether transactions were recorded in the correct period?

Which P&L assertion addresses whether transactions were recorded in the correct period?

• A. Occurrence
• B. Completeness
• C. Accuracy
• D. Cut-off

Answer: (D)

This question tests the timing of recognition for profit and loss items. The cut-off assertion is about recording revenue and expenses in the period in which the related event occurs, so the P&L reflects the true financial activity of that period. In practice, auditors check cut-off by examining transactions around period end—sales and purchases just before and after the close, goods in transit, and invoices dated after period end but relating to activity within the period—to ensure they are recorded in the correct period. If timing is off, revenue or expenses can be misstated for that period. Other P&L assertions focus on whether events happened (occurrence), whether all such events are recorded (completeness), and whether the amounts are correct (accuracy), but cut-off specifically addresses the correct period for recording.

This question tests the timing of recognition for profit and loss items. The cut-off assertion is about recording revenue and expenses in the period in which the related event occurs, so the P&L reflects the true financial activity of that period. In practice, auditors check cut-off by examining transactions around period end—sales and purchases just before and after the close, goods in transit, and invoices dated after period end but relating to activity within the period—to ensure they are recorded in the correct period. If timing is off, revenue or expenses can be misstated for that period. Other P&L assertions focus on whether events happened (occurrence), whether all such events are recorded (completeness), and whether the amounts are correct (accuracy), but cut-off specifically addresses the correct period for recording.