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Revenue and Receipts Cycle - Coggle Diagram
Revenue and Receipts Cycle
Credit sales
-The ordering function
-The dispatch function
-The invoicing function
-The revenue recording function
The credit management function
Ordering function:
-Customer Order
-Internal sales order (hereafter known as ISO)
-Price list
-Credit application form
-Credit bureau information
Internal sales order:
-Be numerical
-Contains the customer details
-Specifies quantity ordered
-Contains prices per official price list
-Authorised by credit manager/sales manager
Credit application:
New customers
-Application form to be completed
-Background checks to determine if the customer is creditworthy
-If customer is creditworthy credit department will establish credit limits
-Capture information on permanent master file
-Changes to details must be authorised by credit controller
Existing customers:
-If the customer is a legitimate one (who already has an account), he or she should offer either an identity number or an account number.
-The credit limit should be verified, and if it has been over, the order will be refused.
Dispatch function
Documentation present:
-Picking slip
-Delivery note
-Back order note (a customer order that cannot be filled when presented)
-List of deliveries
Activities and controls:
-The dispatch function is a manual function
-Transferred to dispatch
-Delivery of goods
-Counter sales
-Gate control
-Because the products have left the warehouse's possession and are therefore vulnerable to theft, the controls must be strong.
-Segregation of duties is very important
Invoicing
Documentation present;
-Sales invoice
-Price list
On the return of a signed delivery note from the customer:
-The delivery note should be matched with the ISO and the invoice should be
generated.
-Numerical list of delivery notes and invoices is frequently produced and missing
numbers followed up by senior person
-Quantities on invoice are obtained from delivery note
-Price on invoice is obtained from price list
-Calculations are reviewed by independent person
Recording function
Documentation present:
-Invoice
-Sales journal
-Debtors ledger
-General ledger
-Invoices must be recorded accurately and entered against correct debtor
-Compare the invoice to DN check for quantity, description and prices
-Sequence checks on invoices if there are missing or duplicate numbers followed up
-Trace posting: Sales journal – debtors ledger – general ledger
-Monthly statements sent out by independent person
Credit management function
Document present:
-All records kept in the cycle are relevant
-Age analysis
-Monthly statement
-Credit bureau information
-Credit application process (dealt with above)
-Identification of debtor to be handed over to lawyers
Receipts from debtors
The documentation present within receipts from debtors in terms of bank
-Cancelled cheques
-Cheque requisitions
-Deposit slips
-Bank statements
-Bank confirmation letter
-Cash book
-Bank reconciliation
The documentation present within receipts from debtors in terms of cash
-Cash register reading
-Cash advance documents
-Cash summaries
-Receipts
-Physical cash counts
Controls:
-Basic controls
-Controls over cash
-Controls over bank account
Basic controls
-Segregation of duties for receipt and recording of money
-Different forms of cash should be recorded and kept seperately
-Proper stationery control
-Money received by mail: (not so relevant anymore)
-Safeguarding of money
-Post-dated cheques received should be recorded in register and strictly controlled
-Adequate insurance should be taken out against theft and fraud
Controls over cash:
-Cashiers
-Petty cash
Controls over bank account:
-The bank account should be reconciled monthly with the Cashbook
-EFT’s is also a valid receipt method
Risks within the receipts from debtors
Two types of risks that can affect an organisation
-lapping/rolling (Revenues in cash from cash sales or receipts from Accounts Receivable are misappropriated).
-kiting (Remove cash and record it as an outstanding deposit on bank reconciliation, then write a check for bogus expenditures and deposit it in the company's bank account, clearing the outstanding deposit).
Control objectives:
-Occurrence/Validity
-Authorisation
-Completeness
-Accuracy
-Recording
-Classification
-Cut off