What is cutoff procedure? How do you perform it? Why it is performed?

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Accepted Answer

Cutoff procedure is a process of determining a specific point in time for ending a particular activity or transaction.

Cutoff procedure is performed to ensure accurate financial reporting by capturing all relevant transactions within a specific period.
It involves setting a specific date and time to stop recording transactions for a particular period, such as month-end or year-end.
The procedure includes reviewing and adjusting entries to ensure all transactions are properly accounted for before the cutoff date.
Examples of cutoff procedures include reconciling bank statements, recording accruals, and verifying inventory counts.
It is important to perform cutoff procedures to prevent misstatements in financial statements and comply with accounting standards.

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