Cash Receipts/AR Cycle

Departments in Cash Receipts Cycle

• Mailroom

• Cashier

• AR

• Accounting

Mailroom Department

• Function:

  • Receives customer payments (checks, remittance advices).

    • Prepares a prelisting (log of incoming cash receipts) and gives to cashier, AR, and Accounting

• Segregation:

  • Cannot record payments in AR or handle cash deposits.

  • Must forward payments to Cashier and remittance advices to AR

Departments in Cash Receipts Cycle

• Mailroom

• Cashier

• AR

• Accounting

Mailroom Department

• Function:

  • Receives customer payments (checks, remittance advices).

    • Prepares a prelisting (log of incoming cash receipts) and gives to cashier, AR, and Accounting

• Segregation:

  • Cannot record payments in AR or handle cash deposits.

  • Must forward payments to Cashier and remittance advices to AR

Cashier

Receives actual receipts, prepares bank deposit slip

AR Department

• Enters receipts in AR subsidiary records

• Match details from bank deposit slip with details from remittance advice

Accounting Department

• compares check listing, check deposit, and cash received summaries

• Enters receipts into AR control account

Completeness Test

Trace total from AR aging to GL

Valuation Test

Test allowance for doubtful accounts

Existence Test

• Confirm a sample of AR

• Inspect shipping documents

• Review subsequent cash receipts

Rights and Obligations Test

• Review Bank confirmations

• Inspect debt agreements

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