Chap 8 Flashcards
Retailers revenue process
Record the sale,
collect cash,
update inventory status
all at the time of the sale.
***high Level Process Goals
Manufacturers revenue process
Manufacturers: Sell product to other companies. Deliver goods and bill customer at a later date. Collect payment. ****High level Process Goals
Business processes common in company-to-company sales transactions are: ** PROCESS GOALS
Collect order data from customer
Deliver goods
Record receivable and bill customer
Handle product returns
Collect the cash
Update records, such as
accounts receivable, cash, inventory, revenue, and
cost of goods sold.
Characteristics indicating risk with respect to sales processes: ***What could screw up my process?
Frequent changes made to sales prices or customers
Pricing structure is complex or based on estimates
Large volume of transactions
One or few key customers
Shipments not controlled directly by the company
Product mix is difficult to differentiate
Shipping and/or recordkeeping at multiple locations
Common procedures associated with the sales process: ***Tools to help you reach your Control Goals – How can I not screw up my process goals?
Authorization of transactions Segregation of duties Adequate records and documents Security of assets and documents Independent checks and reconciliation Cost-benefit considerations
The purpose of tracing shipping documents to prenumbered sales invoices would be to provide evidence that
a. shipments to customers were properly invoiced.
b. no duplicate shipments or billings occurred.
c. goods billed to customers were shipped.
d. all prenumbered sales invoices were accounted for.
a. shipments to customers were properly invoiced.
The purpose of tracing sales invoices to shipping documents would be to provide evidence that
a. shipments to customers were properly invoiced.
b. no duplicate shipments or billings occurred.
c. goods billed to customers were shipped.
d. all prenumbered sales invoices were accounted for.
c. goods billed to customers were shipped.
Company must have procedures for
receiving returned goods, crediting customer’s account, and placing items back in inventory.
Specific controls over the sales returns process:: ***Tools to help you reach your Control Goals – How can I not screw up my process goals?
Authorization of transactions Segregation of duties Adequate records and documents Security of assets and documents Independent checks and reconciliation Cost-benefit considerations
Circumstances which may indicate high level of risk. –: ***What could screw up my process?
Quantities of returns are difficult to determine
High volume of credit memo activity
Product prices change frequently, or pricing structure is otherwise complex
Returns are received at various locations, or issuance of credit memos may occur at different locations
One or few key customers
Returns not controlled directly by the company
Under a system of sound internal controls, if a company sold defective goods, the return of those goods from the customer should be accepted by the
a. receiving clerk.
b. sales clerk.
c. purchasing clerk.
d. inventory control clerk.
a. receiving clerk.
Company-to-company sales are typically
made on account, and a time span is given for the customer to pay.
Which of the following is not a document that is part of the cash collection process?
a. Remittance advice
b. Cash receipts journal
c. Bank deposit slip
d. Packing slip
d. Packing slip
Specific controls over the cash receipts process:
Authorization of transactions Segregation of duties Adequate records and documents Security of assets and documents Independent checks and reconciliation Cost-benefit considerations
Circumstances that may indicate risks to cash collections.
High volume of cash collections
Decentralized cash collections
Lack of consistency in the volume or source of collections
Presence of cash collections denominated in foreign currencies
