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Unit 4 Revenue & receipts cycle Summary, Internal control - Coggle…
Unit 4 Revenue & receipts cycle Summary
Credit sales
Dispatch function
Documentation
Picking slip
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
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
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.
Goods which cannot be picked because they are “out of stock” will be identified and back order note will be created
Delivery note
Should be
Sequentially numbered
Described the quantity and the goods
Signed by client as acknowledgement of receipt of goods
Check items to the invoice (Builders warehouse vs. SPAR)
Recorded in a register to be matched with invoice
Issued in duplicate copy
Back order note (a customer order that cannot be filled when presented)
Out of stock goods
List of deliveries
Invoicing function
Sales invoice
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 lists
Revenuer recording function
Documentation
Invoice
Invoices must be recorded accurately and entered against correct debtor
Compare the invoice to DN
Check for
Quantity
Description
Prices
Sales journal
Debtors ledger
General ledger
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
Credit management function
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
Ordering function
Documentation
Customer Order
Internal sales order (ISO)
Should be
Be numerical
Contains the customer details
Specifies quantity ordered
Contains prices per official price list
Authorised by credit manager/sales manager
Price list
Credit application form
Credit bureau information
Credit application process
New 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
Existing customer
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
Receipts from debtors
Controls
Basic controls;
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:
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
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
Controls over cash; and
Cashiers
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
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3 more items...
Compare cash with supporting documentation
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
Petty Cash
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
Controls over bank account.
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
Misappropriation of receipts in cash from cash sales or receipts from Accounts Receivable
Kiting
Remove cash and reflect as outstanding deposit on bank reconciliation
Procedure to detect Lapping/Rolling and Kiting
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;
Recorded on return and debtors account debited and
A goods returned voucher and credit note is issued.
Credit note returns and allowances journals;
Debtors journal;
General ledger.
Adjustments
Ensure accuracy recording and authorisation;
Discounts;
Returns and corrections;
Writing off bad debt.
Controls
Authorisation;
Segregation of duties;
Formal documentation;
Monitoring & supervision
Control objectives
Occurrence/Validity;
All recorded credit sales are valid and supported by proper
documentation
Authorisation;
All credit sales are authorised according to company policy
Completeness;
All valid credit sales are recorded and nothing is left out
Accuracy;
All credit sales are recorded on sales invoices at the correct quantity, price
and are arithmetically correct
Recording;
All credit sales invoices are recorded correctly
Classification; and
All sales are correctly classified according to the nature thereof
Cut off
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