Revenue/Receipts - Sales

Question 1

Identify the key accounting documents in the revenue/receipts (sales) transaction cycle, each of which should be prenumbered.

Answer 1

1. )Sales invoices
2. )Shipping documents for outbound shipments
3. )Receiving documents for inbound shipments including sales returns

Question 2

List two access controls applicable to the revenue/receipts (sales transactions) business process.

Answer 2

1. )Limit access to computer passwords limit access.

2. )Ensure cash receipts are handled by someone without access to accounts receivable record keeping.

Question 3

How should employee responsibilities be allocated to facilitate a proper segregation of duties in the revenue/receipts (sales transactions) cycle?

Answer 3

1. )An independent employee should review customer statements.
2. )An independent department should grant credit to customers.
3. )An independent clerk in the shipping/receiving area should account for returns.

Question 4

Identify the objectives of internal control related to revenue/receipts (sales transactions).

Answer 4

1. )Goods and services are provided in accordance with management’s orders.
2. )Terms of sale are in accordance with management’s orders.
3. )Credit terms and limits are properly established.
4. )Deliveries of goods and services result in accurate and timely billings.
5. )Sales discounts and billings are in accordance with management’s authorization.

Question 5

Describe management’s role in the execution of transactions controls in revenue/receipts (sales).

Answer 5

Management should:

1. )Review terms of sale and note approval.
2. )Establish general approval of sales within certain limits and specifically approve sales over those limits.
3. )Approve all adjusting journal entries.