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UNIT 4 - REVENUE AND RECEIPTS CYCLE, UNIT 4 ACTIVITY 9 C T FRITZ 220164455…
UNIT 4 - REVENUE AND RECEIPTS CYCLE
3 functions
Credit Sales 2. Receipt from debtors and 3. Sales adjustments
Documents required under 3 functions
Function 1: Credit sales consist of 5 functional areas with different documents required
Credit Management Function
Documents required: All records kept in cycle are relevant; Age analysis; Monthly statement and credit bureau information.
Dispatch function
Documents required: Picking slip; delivery note; Back order note and list of deliveries.
Invoice function
Documents required: Sales invoice and price lists
Revenue Recording function
Documents required: Invoice; Sales journal; Debtors ledger and General ledger
Ordering function
Documents required: Customer order; Internal Sales order (ISO); Price list; Credit application form and Credit bureau information.
Function 2: Documents required or Receipt from debtors function
Documents when receipts from debtors in terms of bank
Cancelled cheques; Cheque requisitions; Deposit slips; Bank statements; Bank confirmation letter; cash book and bank reconciliation
Documents when receipts from debtor in terms of cash
Cash register reading; cash advance documents; cash summaries; receipts; and physical cash counts.
Function 3: Documents for Sales adjustment
Goods returned voucher; Credit note returns and allowance journals; Debtors journal and General ledger
Control objectives
Receipts Cycle
Occurrence / Validity: All payments and discount debtors' accounts are valid and are supported by appropriate documentation. 2. Authorisation: All credit adjustents, e.g credit notes, discounts, etc are authorised according to company policy. 3. completeness: All valid payments received from debtors are recorded. 4. Accuracy: all payments and discounts accounted for at the correct amount and discounts accuracy calculated. 5. Recording & classification: All payments and discounts correctly classified and recorded. 6. Cut off: Payments and discounts are recorded in the correct period to which it relates.
Revenue cycle
Occurrence/ Validity: All recorded credit sales are valid and supported by proper documents: 2. Authorisation: All credit sales are authorised according to company policy 3. Completeness: All credit sals are recorded and nothing is left out. 4. Accuracy: All credit sales are recorded on sales invoices at the correct quantity , price and are arithmetically correct. 5. recording: all credit sales invoices are recorded correctly 6. Classification: All sales are correctly classified according to the nature thereof. 7. Cut off: All sales transactions are recorded in the correct reporting period.
Internal Controls - example: An existing customer orders on credit without verifying the customer by way of ID or account number as well as the credit limit. he result is that the company can trade with someone who is not the correct client and that more orders are accepted when the credit limit has been exceeded.
UNIT 4 ACTIVITY 9 C T FRITZ 220164455