Cash sales cycle (Revenue and Receipts)

Transaction types and functions

-Initiate: Accept & process order, Granting of Credit

-execute: Dispatch goods

-Record and Process: Invoicing & recording

Sales on Cash or Credit Accounts

Sales and Trade Receivables and Bank

Risks When we accept and process the order ( Initiate )

1. Fictitious order - Validity

2. Orders accepted with no inventory in store - Bad business

3. Received orders not processed or not acted up on - Completeness

Risks With the granting of credit ( Initiate )

1. Credit is granted to an un- creditworthy person - validity

2. Credit not granted , or limits amended i.t.o policy - validity

Risk When the goods are dispatched ( execution )

1. Dispatch the goods even though they were not ordered ( no approved order ) - Validity

2. Goods ordered not dispatched at all - Completeness

3. Incorrect dispatch ( i.t.o amount and type ) . Compare physical goods vs delivery note - Accuracy

Risks With the invoicing and recording ( process and record )

1. Goods dispatched are not invoiced - Completeness

2. Goods invoiced without the proof of delivery - validity

3. Incorrectly invoiced i.t.o details ( Price , amount , type , debtors ' details ) - accuracy

4. Transaction recorded in the incorrect financial period - completeness

5. Not all invoices are recorded - completeness

6. Recording in the wrong account or posted incorrectly from SJ to GL - accuracy

Difference between internal control objectives and internal controls

Control objectives:All approved orders are carried out .

Internal controls: Orders are pre - numbered and matched with the delivery note . The credit manager checks the sequence of the orders and follows up on outstanding order numbers and orders without delivery notes .

Controls

1. ACCEPT AND PROCESS ORDER

2. DISPATCHING OF GOODS - WAREHOUSE

3. INVOICING AND RECORDING

What documents are required

Sales order, delivery note, sales invoice

ACCEPT AND PROCESS ORDER

-order clerk prepares a pre numbered order form

-The order must then be sent to the credit manager

The order form should include

-Prices as quoted to the client .

-The prices must be according to the approved price lists .

-The previous year's sales levels must be checked to determine whether the person qualifies for the approved discount

When the granting of credit occurs New client

-There should be a credit application and approval

-Credit checks

-A credit limit should also be set

When the granting of credit occurs Existing client

-Available credit

-Additional credit

Delivery note

before the order is accepted it should be checked whether there are inventories available

DISPATCHING OF GOODS - WAREHOUSE

-The storeman then sends an email to the sales department to confirm receipt of the order .

-The chief storeman then instructs the packers to pack the order

-The delivery note must be authorised and signed by the chief store manager

-The delivery register must be reviewed on a regular basis to ensure that all orders are delivered , this must be performed by the security guard .

The delivery note must be

-Pre - numbered and prepared by one of the storemen .

-must include: Date of dispatch, The purchaser, The address, The description and amount in fivefold

Exceptions - dispatching if goods

-If the customer is not at home , the items must not be delivered ( goods should not be left unattended ) must be returned to the store and kept in a separate area in the store .

-This must then be noted on the delivery note and the delivery staff should sign as he is receiving the goods back and the goods should be arranged to be dropped off at a different time .

INVOICING AND RECORDING

-The signed delivery note is forwarded to the Invoicing Clerk

-The number sequence of invoices must be checked by the accountant

-The other invoicing clerk or accountant ( segregation of duties ) must : -Agree to the information on the invoice with the signed delivery note and the order form . Check castings and VAT Compare the price with the authorised price list .

-The accountant will then post the invoice to the sales journal and then to the debtors and general ledger .

-The accountant must then do a monthly reconciliation at between the debtors ' control account and the debtors ' ledger

Sales invoice

-Information of the purchaser

-Sales transaction

-Amount owing

-Payment conditions

Account or monthly statement

-Invoices issued

-Payments made

-Discounts allowed

-Returns granted

-The end balance on the amounts owing

Payment advice slip

-This is attached to the monthly statement indicating payment

-This will be sent with the payment back to the business to match payment to invoice .