Unit 4 Revenue & receipts cycle Summary

Credit sales

Dispatch function

Invoicing function

Revenuer recording function

Credit management function

Ordering function

Documentation

Customer Order

Internal sales order (ISO)

Price list

Credit application form

Credit bureau information

Should be

Be numerical

Contains the customer details

Specifies quantity ordered

Contains prices per official price list

Authorised by credit manager/sales manager

Credit application process

New customer

Existing customer

Complete application form

Conduct background check

Credit department establishes credit limits

Capture information on masterfile

Changes to details must be authorised by credit controller

client should present either
identity number or account number

credit limit should be checked and if the credit limit has been exceeded the order cannot be accepted

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Documentation

Picking slip

Delivery note

Back order note (a customer order that cannot be filled when presented)

List of deliveries

Should be

Sequentially numbered

Described the quantity and the goods

Signed by client as acknowledgement of receipt of goods

Recorded in a register to be matched with invoice

Issued in duplicate copy

Manual function

There will be a person responsible for picking the goods from the store using a signed copy of the picking slip

After the goods has been picked using a picking slip a delivery note is created

Goods which cannot be picked because they are “out of stock” will be identified and back order note will be created

Once goods have been pick and a delivery note has been made out, the goods are transferred to dispatch to be packed, labeled and delivered

Check items to the invoice (Builders warehouse vs. SPAR)

Out of stock goods

Gate control implementation

Guards should count goods and agree the goods with the delivery note and sign.

Guards should check the quantity on the delivery note versus the quantity being delivered

Controls must be sound because, by this stage, the goods have left the custody of the warehouse and are thus susceptible to theft

Segregation of duties is very important.

Sales invoice

Price lists

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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

Documentation

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

Prices

Sequence checks on invoices if there are missing or duplicate numbers followed up

Trace posting: Sales journal – debtors ledger – general ledger

statements sent out by independent person monthly

Documentation

All records kept in the cycle are relevant

Age analysis

Monthly statement

Credit bureau information

Credit application process

Identification of debtor to be handed over to lawyers

Objective

limit the loss from bad debts

encourage debtors to pay
promptly

Receipts from debtors

Controls

Basic controls;

Controls over cash; and

Controls over bank account.

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Segregation of duties for receipt and recording of money.

Different forms of cash (sales, petty cash, and cash loans) should be kept separately and recorded seperately

Proper stationery control:

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Receipts, cash sales slips/invoices etc., are numerically recorded;

Locked away;

Recorded in a register (sign for issuing and on receipt)

Money received by mail

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Opened and counted by two independent persons;

Recorded in a mail register;

The person/cashier to whom it is handed over should sign as proof of receipt

Safeguarding of money

Locked in vault, etc. (key control);

Banked as soon as possible (next day/2x per day, etc.)

Post-dated cheques received should be recorded in register and strictly controlled.

Adequate insurance should be taken out against theft and fraud

Cashiers

Petty Cash

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One person responsible

Physical safekeeping

Limit fund amount

Define type of expenditure

Pre-numbered petty cash vouchers

Payments approved

Reimbursements

Exact amount of voucher

Vouchers/slips cancelled

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Cashier must balance cash on a daily basis and must compare it with the source (receipt, cash invoices, cash register totals) and record it on a cash
receipt summary

Compare cash with supporting documentation

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Signed by the cashier;

Independently reviewed by a senior official;

Counts the money in the cashier's presence (cashier signs for receipt back or money

Shortages should be paid-in by the cashier

Every cashier should only be responsible for his own funds

During lunch, etc. cash/cash register should be locked and proper key control
exercised

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Every cashier should be responsible for his own float - lock in cash drawer/cashbox.

Supervision over cashiers - senior/camera's, etc.

Cash must be banked as soon as possible (next day/twice a day)

The bank account should be reconciled monthly with the Cashbook

Independent of the person that writes up the cashbook;

Reviewed by senior independent official

EFT’s is also a valid receipt method

Risks within the receipts from debtors

Lapping/Rolling

Kiting

Misappropriation of receipts in cash from cash sales or receipts from Accounts Receivable

Remove cash and reflect as outstanding deposit on bank reconciliation

Procedure to detect Lapping/Rolling and Kiting

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Positive accounts receivable confirmations;

Surprise cash counts & bank reconciliations; and

Cash summaries compared to entries in cash receipts and cash payment records, mail registers, deposit slips

Sales adjustments

Documentation

Goods returned vouchers;

Credit note returns and allowances journals;

Debtors journal;

General ledger.

Recorded on return and debtors account debited and

A goods returned voucher and credit note is issued.

Adjustments

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Ensure accuracy recording and authorisation;

Discounts;

Returns and corrections;

Writing off bad debt.

Controls

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Authorisation;

Segregation of duties;

Formal documentation;

Monitoring & supervision

Control objectives

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Occurrence/Validity;

Authorisation;

Completeness;

Accuracy;

Recording;

Classification; and

Cut off

All recorded credit sales are valid and supported by proper
documentation

All credit sales are authorised according to company policy

All valid credit sales are recorded and nothing is left out

All credit sales are recorded on sales invoices at the correct quantity, price
and are arithmetically correct

All credit sales invoices are recorded correctly

All sales are correctly classified according to the nature thereof

All sales transactions are recorded in the correct reporting period

Weakness example

Invoices are not recorded against the relevant debtor

the individual debtor's account must be in the debtors ledger

Internal control