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Revenue and Receipts Cycle - Coggle Diagram
Revenue and Receipts Cycle
Credit sales - this is the first of the three distinct functions of the cycle and consists of five functional areas
The ordering function
Key docs: Customer Order, ISO, price list, credit application form and credit bureau information
For all orders, ISOs must be generated
New customers go through credit application process
Existing customers should present identity or account numbers
The Dispatch function
Key docs: Picking slip, DN, Back order note and list of deliveries
Manual function, person picks orders and handles appropriate paperwork
Goods transferred to dispatch to be packed, labelled and delivered
Goods delivered = must have a DN
Gate control = security checks
Invoicing function
Docs = sales invoice and prices list
On return of signed DN from customer, invoice should be generated after necessary checks are completed
Calculations to be reviewed by an independent person
4.Recording function
Docs: Invoice, sales journal, Debtors ledger and General ledger
invoices recorded accurately against correct debtor
Compare invoices to DNs and do appropriate checks
Sequence checks on invoices if there are missing or duplicate numbers followed up
Trace posting and Statements sent out by independent person
Credit management function
Docs: all records kept in the cycle, age analysis, monthly statement and credit bureau information
Credit application process
Identification of debtors to be handed over to lawyers
Receipts from Debtors function
Docs include: cancelled cheques, deposit slips bank statements, cash book, cash receipts and cash summaries etc
Segregation of duties!!!
Proper stationery control
Safeguarding of money
Controls over cash and petty cash
Cashiers = must balance money daily, compare cash with supporting docs, each one responsible for their own cashbox, security over the cashier and necessary precautions
Controls over bank account - EFTs and cashbook recons
Payment to creditors/ payables function
Docs: Goods returned vouchers, credit note returns and allowances journals, debtors journal and general ledger
Goods returned - Recorded on return and debtors account debited and goods returned voucher and credit note is issued
Adjustments - discounts, accuracy, returns and corrections and bad debts
Controls - Authorisation, Segregation of duties, Formal documentation and Monitoring & supervision
Weaknesses and Recommendations
Objectives are the seven general objectives
To ensure objectives are met, weaknesses must be identified and solutions/ controls applied
Example of a weakness - Selling goods on credit with no credit application process or checks on customers
Control - enforce credit checks and credit app process for all new credit customers
Substantive testing: tests of detail of classes of transactions, account balances and disclosures and substantive analytical procedures
Occurrence – recorded transactions have occurred and they pertain to the company
Accuracy – the amounts of sales have been recorded appropriately
Cut-off – the sales transactions have been accounted for in the correct accounting period
Classification – all sales have been recorded in the proper accounts
Completeness – all sales should have been recorded, have been recorded