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Revenue and Receipts Cycle - Coggle Diagram
Revenue and Receipts Cycle
Overview
encompasses both the sale of goods (revenue) and the collection of cash (receipt)
focusses on the processed involed in generating revenue and managing cash receipts within and organization.
maintaining positive cash flow, meeting financial obligations and sustaining the overall health of the organization.
Functions in the cycle as a whole
Credit sales
Ordering function - to record orders and initiate action to fill them.
Dispatch function - to fill accepted orders promptly and accurately and to ensure only authorised orders are acted on.
Invoicing function - to notify the customer promptly of amounts due for goods supplied
Recording function - to record the sales made and to raise the corresponding debtor promptly
Credit Management function - to limit the loss from bad depts and to encourage debtors to pay promptly
Receipts from Debtors and Cash Sales
Receipts from receivables and recording of those receipts
Cashier will receive the money in any form of receipts for the sale
it must be captured correctly and kept in the till until cash up is perfomed.
Sales Adjustments
Recording of goods received from customers.
ensuring accuracy and recording of authorisations
Internal Controls and Controls Objectives
Supervision and Review
Segregation of duties
Rotation of duties
Personnnel take leave regularly
Management control
Internal Audit
Occurence/ Validity
Authorisation
Completeness
Classification
Accuracy
Recording
Cut-Off
Documents in the whole cycle
Orders from Clients
Internal Sales Order
Picking slip
Delivery Notes
Sales Invoice
Sales Journal
Debtors account in the debtors ledger
Debtors control account in the general ledger
Monthly Statements
Example of weakness/ risk
Scenario - an orgnaisation sells goods to cusotmers on credit but the organisation does not have a credit application process and grants credit to every customer.
Weakness - the organisation does not have a credit application or credit process in place
Risk - because of lacking credit application process, you are granting credit to non-worthy customers resulting in customers that are unable to pay you back for the goods that were granted on credit, this could result in large amounts of bad depts that need to be written off.
Substantive Testing
Occurence - recorded transactions have been occured
Accuracy - amounts on sales have been recorded
Cut off - sales transactions are accounted for
Classification - all sales are recorded in the proper accounts
Rights - company holds rights to trade receivables
Existance - trade receivables in the balance do exist
Accuracy/ Valuation - trade receivables are recorded in the financial statements
Completeness - all trade receivables have been recorded