Revenue/Receipts- Sales

Question 1

What are the key documents in the revenue/receipts cycle?

Answer 1

• Purchase Order- External document
• Sales Order- Internal document
• Shipping documents (outbound shipments, inbound shipments, bills of lading)
• Sales invoice (billing)
• Customer remittance advice- to match the customers payment with the appropriate account

Question 2

What are the control actives (SCARE):

Answer 2

Separation of duties: Different employees should perform the tasks associated with (authorization, access, and accounting)

• Authorization (sales department, interaction with customers, separate credit department- no one in the sales staff should be determining credit). Who has approval to authorize specific sales transaction.
• Accounting (record keeping)- handle the A/R
• Access- who has access to the assets (shipping department. Who has access to computer passwords. Who has custody of cash receipts who do not have responsibility over accounting-record activities.
• Review- Monthly statements should be sent to customers, reviewing the shipping documents to what was billed, making sure transactions have been captured in the proper period.
• EDP/IT: All key documents should be pre-numbered. Revenue receipts should have a detailed list (sub-ledger)