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Revenue and receipts cycle - Coggle Diagram
Revenue and receipts cycle
Credit Sales
Ordering Function:
During this function orders from customers are recorded and the action to fill these orders are initiated.
Documents:
Customer order
Internal Sales order (ISO)
Price list
Credit application form
Credit bureau information
Dispatch function:
During this function the accpeted orders are to be filled promptly and accurately, with only authorised orders being acted on.
Documents:
Picking slip
Delivery note (DN)
Back order note
List of deliveries
Credit management function:
This function's objective is to motivate debtors to pay promptly and to limit the loss from bad debts.
Documents:
All records kept in the cycle are relevant
Age analysis
Monthly statement
Credit bureau information
Revenue recording function:
During this function the sales that have been made is recorded and raised to the corresponding debtor.
Documents:
Invoice
Sales journal
Debtors ledger
General ledger
Invoicing function:
In this function the customer is informed of the amount due for the goods that have been supplied.
Documents:
Sales invoice
Price lists
Control objectives
Occurrence/ validity:
All recorded credit sales are valid and supported by documentation.
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Authorisation:
All credit sales are authorised according to company policy.
Completeness:
All valid credit sales are recorded and nothing is left out.
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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:
All sales are correctly classified according to the nature thereof.
Cut off:
All sales transactions are recorded in the correct reporting period.
Receipts from debtors
Documents i.t.o receipts from bank:
Cancelled cheques
Cheque requisitions
Bank statements
Bank confirmation letter
Cash book
Bank reconciliation
Documents i.t.o cash:
Cash register reading
Cash advance documents
Cash summaries
Receipts
Physical cash counts
1. Basic controls
Segregation of duties for the receipt and recording of money.
Different types of cash should be kept separate from each other and recorded as such.
Documents numerically ordered, locked away and recorded in a register.
When money is received in mail it should be opened and counted by two independent persons, recorded in mail register, cashier to whom it is handed should sign proof of receipt.
Money should be safeguarded and banked ASAP.
Post-dated cheques to be strictly controlled and recorded in register.
Insurance to be taken out against theft and fruad.
2. Controls over cash
Cashiers:
Cash to be balanced daily and compared to source documents. This should be recorded on receipt summary.
Receipt summary to include signature of cashier, independently reviewed by senior official, money to be counted in presence of cashier.
Cash to be compared with supporting documents, differences to be covered by cashier.
Cashier responsible for their own funds at all time, when cashier is away from the register it should be locked and proper key control is to be exercised.
Each cashier responsible for their own float.
Supervision over cashiers.
Cash to be banked ASAP.
Petty cash:
There should be one person responsible
Physical safekeeping
Limit fund amount
Define expenditure
Pre-numbered petty cash vouchers
Payments to be approved
Reimbursements
Exact amount of vouchers
Vouchers/ slips to be cancelled
3. Controls over bank account:
The bank account to be reconciled with cashbook on monthly basis.
Reconciliation to be done by person independent of those that write up cashbook.
Reconciliation to be reviewed by senior independent official.
Controls in receipts cycle
Occurrence/ Validity:
All payments and discount on debtor's accounts are valid and are supported by appropriate documentation.
Authorisation:
All credit adjustments, e.g. credit notes, discounts, etc., are authorised according to company policy.
Completeness:
All valid payments received from debtors are recorded.
Accuracy:
All payments and discounts accounted for at the correct amount and discounts are accurately calculated.
Recording & Classification:
All payments and discounts are correctly classified and recorded.
Cut off:
Payments and discounts are recorded in the correct period to which it relates.
Risks
Kiting
Cash is removed and an outstanding deposit is reflected on the bank reconciliation
At a later stage a cheque is drawn for fake expenses and is then deposited into the bank account in order to clear the outstanding deposit.
Lapping/ Rolling
Misappropriation of receipts in cash from cash sales or receipts from Accounts receivable.
Procedure to detect risks:
Positive accounts receivable confirmations
Surprise cash counts & bank reconciliations
Cash summaries compared to entries in cash receipts and cash payment records, mail registers, deposit slips.