Chap 4 - Revenue Process

customer purchase order

An agreement to purchase the stated materials, stated prices, under stated term sent by customer to the sales department

Validity - Cash Receipt recorded but not valid. Authorization - Cash Receipt recorded with unauthorized prices, terms, customer, items, or agents. Completeness - Cash Receipt completed but not recorded. Valuation - Cash Receipt is recorded at the correct amount. Posting & summarization - correct posting to sales journal or accounts in the Accounts Receivable subsidiary ledger, and from cash journal to the general ledger.

Automated System: Lockbox and Turn-around Documents for Cash Receipts - Lockbox: Mail is opened, and "clean" remittances are separated from those that require extra handling. - Payments and RAs are batched in groups and fed through the check transport machine. - The check amounts are read automatically by CAR/LAR (Courtesy Amount Recognition/Legal Amount Recognition). - Check machine extracts the customer account number from the RA. - Bank account is updated with all check amounts. - Lockbox sends company datafile of payments and RAs. - System uses datafile and automatically checks database of invoices/deliveries, confirms the invoice number, and extracts the customer account number and invoice dollar amount . - System then electronically updates the individual accounts receivable records and other $ amounts.

Sales Order recorded that was not authorized. • Credit Limit Exceeded

Automated application controls: • Total Order $ Amount + Current A/R must be <= Credit Limit

Authorization - Sale Order recorded with unauthorized prices, terms, customer, items, or agents. Customer credit limit is incorrect.

Customers are qualified by the credit department through a Credit Reporting Service. Credit Department enters customer in system and establishes credit limit in system. Customer Approval form is signed. Only the Credit Department can update a credit limit for a customer.

Validity - Sales Order recorded but not valid. Sales Order recorded but not valid.

Order copy sent to customer. SOD: SOD/LAC : • Date Entry is system-restricted to appropriate personnel. Require PO from customer to validate order.

Completeness - Shipment completed but not recorded. Shipment completed but not recorded.

Picking Tickets are pre-numbered. Annotated Picking Tickets are accounted for weekly (missing numbers).

Completeness - Sales Order completed but not recorded. Sales Order completed but not recorded.

Pre-Numbered Forms.

packing list

Prepared when order is packed for shipment. This document will accompany the shipment, specifying the items and quantity shipped.

sales order

Sales department creates sales order based on PO received, Sales order contain the same information abt the products, quanities, pricing and delivery date that were on PO Sales order contains name, address and quantities of customer purchase order. Ot also has sales order number

Sales Order specifies: • Unauthorized/incorrect Inventory Item • Incorrect price • Unauthorized/incorrect Customer

Validity Check: A Sales Order requires a minimum of one inventory item from the pre-approved listing of inventory and is selected, validated by the system and assigned to the Sales Order. System uses automated application control for item prices and pulls the appropriate unit price from the inventory master data. Validity Check: When a Sales Order is recorded in the system, one customer from the pre-approved listing of customers is selected, validated by the system, and assigned to the Sales Order.

Validity - Shipment recorded but not valid. Shipment recorded but not valid.

Validity check on Sales Order: • Delivery must specify an un-fulfilled Sales Order to match against. Picking ticket required to remove items from warehouse and prep for shipping. Picking ticket system generated from un-fulfilled sales orders (open line items). Pre-numbered picking tickets used and number is entered when recording delivery.

picking document

When warehouse receive the sales order, they prepare the picking document, which has name and address of customer, order number, date and terms f delivery.

customer inquiry

a request from customers for information about the availability and the prices of the products specified in the inquiry

customer payment

check/online

customer invoice

invoice is sent to customer after shipment. It contains list of materials sent to clients, along with the cost.

quotation

prepared by sales department after receiving the inquiry. Quotation spells out the availability and the prices of materials specified in inquiry

Authorization - Shipment recorded with unauthorized prices, terms, customer, items, or agents. Shipment specifies: • Incorrect Customer. • Records incorrect Total Price. • Records incorrect items and item prices. • Records incorrect quantity shipped.

• All of the data from the Sales Order is copied into the Delivery screen. • The Delivery Clerk then updates the quantity delivered with the actual quantity from the annotated Picking Ticket. • A Packing Slip is created that lists the items being shipped and the quantities; customer name and address; and sales order number initiating the delivery. Prior to leaving the Delivery Yard, The truck driver compares the quantities and items actually on the truck with the Packing Slip sent with the delivery. • Automated application control for item prices and total price calculation. • Automated application control: • Qtyshipped <= QtyOrdered • Customer statements sent monthly.

Valuation - Shipment is recorded at the correct amount.

• Automated application control for item prices and total price calculation. • Automatic invoicing.

Posting & summarization - correct posting to sales journal or accounts in the Accounts Receivable subsidiary ledger, and from sales journal to the general ledger.

• Customer statements sent monthly. • Computer automatically posts sales transactions to AR and subsidiary AR accounts. • Subsidiary AR accounts reconciled to total GL total AR balance monthly.