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10 Cards in this Set
- Front
- Back
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What are the five Classes of Transactions in the Sales and Collection Cycle
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Sales Cash Receipts Sales Returns and Allowances Write-off uncollectible accounts Estimate of bad debt expense |
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Accounts included in the Sales and Transactions Collection Cycle
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Sales, Accounts Receivable, Cash in bank, Sales returns and allowances, allowance for uncollectible accounts, bad debt expense
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Classes of Transactions: Sales
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Accounts: Sales & AR Business Function: Processing Customer Orders, Granting credit, shipping goods, billing customers and recording sales |
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Classes of Transactions: Cash Receipts
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Accounts: Cash in bank (debits from cash receipts) Business Functions: Processing and recording cash receipts Documents and records: Remittance advice, prelisting of cash receipts, cash receipts of transaction file, cash receipts journal or listing |
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Classes of Transactions: Sales Returns & Allowances
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Accounts: Sales Returns & Allowances and AR Business Function: Processing and recording sales returns and allowances Documents: Credit Memo, sales returns and allowances journal. |
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Classes of Transactions: Write-off of uncollectible accounts
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Accounts: AR, Allowance for uncollectible accounts Business Functions: Writing off uncollectible accounts receivable Documents & Records: Uncollectible account authorization form, General journal |
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Classes of Transactions: Bad Debt Expense
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Accounts: bad debt expense, allowance for uncollectible accounts Business Function: Providing for bad debts Documents and Records: General journal |
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What are the 4 steps to assessing Control Risk?
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1. Identify key internal controls and deficiencies for sales. 2. Associate the key internal controls and deficiencies with the audit objectives. 3. Determine a framework for assessing control risk, which is provided by the transaction-related audit objectives 4. Assess control risk for each objective by evaluating controls |
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What are the key control activities for sales?
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Adequate separation of duties & Proper Authorization |
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What are the three points of Proper Authorization?
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- Credit must be properly authorized before a sale takes place- Goods must be shipped only after proper authorization - Prices, including basic terms, freight, and discounts, must be authorized.
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