Revenue system Flashcards
Stages of the revenue cycle (5)
- Order taken
- Goods despatched
- Invoice raised
- Sale recorded
- Cash collected
What are the key risks when an order is taken? (3)
- Orders taken from customers who cannot pay on a timely basis
- Orders not recorded properly or not fulfilled resulting in loss of custom
- Goods are not available
What are the key control objectives when an order is taken? (3)
- Only supply customers who are likely to pay on a timely basis
- Record orders correctly
- Fulfil all orders
What are some examples of controls activities when an order is taken? (7)
INARMS-R
- Check INVENTORY LEVELS before confirming orders
- Obtain credit checks for NEW CUSTOMERS
- AUTHORISE credit limits
- REVIEW credit limits regularly
- MATCH customer orders with despatch notes and follow up unmatched orders
- Use SEQUENTIALLY numbered order forms
- Check credit REMAINING before confirming orders
What are the key risks when goods are despatched? (4)
- Customers may dispute whether goods were received
- Incorrect goods may be despatched
- Goods may be despatched but not recorded, resulting in loss to the business
- Goods are of an inferior quality
What are the key control objectives when goods are despatched? (3)
- Orders are despatched promptly and to the correct customer
- All orders are despatched
- All despatches are recorded
What are some examples of controls activities when goods are despatched? (4)
MORE
- Match goods despatch notes to invoices and follow up unmatched goods despatch notes
- Obtain customer signature on a copy of the goods despatch note
- Record goods outwards on sequentially numbered goods despatch notes
- Examine goods outwards for quantity, quality, and condition and agree to sales order
What are the key risks when an invoice is raised? (4)
- Invoices may not be raised resulting in loss of income
- Invoices may be inaccurate resulting in loss of income or customer goodwill
- Invoices may be wrongly cancelled by credit notes resulting in loss to the business
- Wrong discount is applied
What are the key control objectives when an invoice is raised? (3)
- All goods despatched are invoiced
- Invoices are raised accurately
- Credit notes are only raised accurately and for valid reasons
What are some examples of controls activities when an invoice is raised? (4)
CUCA
- Check calculations of quantity x price for accuracy
- Use authorised selling prices to prepare invoices
- Check condition of goods returned and record on goods return notes
- Authorisation of credit notes
What are the key risks when sales are recorded? (2)
- Invoices and credit notes may not be properly recorded leading to misstatements in the financial statements
- Debts may not be recorded when they are not recoverable
What are the key control objectives when sales are recorded? (3)
- Only valid sales are recorded, at the correct amount, and in the correct period
- Sales are recorded in the correct customer accounts
- Identify potential bad debts on a timely basis
What are some examples of controls activities when sales are recorded? (6)
SMS-RAR
- Sequence checks for invoices being recorded
- Match cash receipts to invoices
- Send regular statements to customers
- Review and follow-up overdue accounts
- Authorisation of bad debt write-offs/allowance
- Reconciliation of receivables ledger control account
What are the key risks when cash is collected? (3)
- Receipts may be allocated to the wrong customer leading to disputes
- Delays in banking could result in cash being lost
- Wrong customer account is debited
What are the key control objectives when cash is collected? (2)
- All receipts are recorded correctly
2. All receipts are banked promptly
