Revenue Cycle and Accounts Receivable Assertions

These flashcards focus on key terms and concepts related to revenue cycle processes and assertions.

Revenue Cycle Summary

A summary of processes and controls ensuring that revenue transactions are recorded accurately and completely.

Occurrence

The assertion that sales transactions actually occurred and are not fictitious.

Completeness

The assertion that all sales transactions are recorded in the financial statements.

Cutoff

The assertion that sales transactions are recorded in the correct accounting period.

3-way match

A control procedure that verifies recorded sales against the purchase order (PO), bill of lading (BOL), and invoice.

Existence (Accounts Receivable)

The assertion that accounts receivable represent amounts actually owed by customers.

Valuation (Accounts Receivable)

The assertion that accounts receivable are recorded at the appropriate collectible amounts.

Credit Approval

A procedure that requires authorization before credit sales are finalized.

Positive Confirmation

An audit procedure requesting customer responses regardless of the accuracy of their balances.

Negative Confirmation

An audit procedure requesting responses only if balances are incorrect, weaker evidence than positive confirmation.

Aging Analysis

A method used to evaluate the collectibility of accounts receivable by categorizing them based on how long they have been outstanding.

Bill of Lading (BOL)

A shipping document that serves as a contract between the shipper and carrier, detailing shipping and item information.

Packing Slip

A document accompanying goods shipped that shows the description and quantity of the items.

Prenumbering of Documents

A control measure to prevent missing or duplicated sales documents.

Confirmation of Accounts Receivable

An essential audit procedure confirming the existence of accounts receivable through direct communication with customers.