LEE, VENICE

BSA
ACCTSYS

APPENDIX D3
UNIT 4: REVENUE AND COLLECTION CYCLE

I.

1) Which of the activities listed below is not part of the revenue cycle?

B . receiving

2) Which method is most likely sed when a company offers customers discounts for prompt payment?

A . Open-invoice method

3) The reconciliation that occurs in the shipping department is intended to ensure that

D . the goods shipped match the goods ordered

4) The billing department is not responsible for

A . updating the inventory subsidiary records

5) The customers request for merchandise, the customer order, would be in he form of:

D . any of these formats

6) For good internal control over customer remittances, the mail-room clerk should separate the checks from
the remittance advises and send the customer payments too which department?

B . Cashier

7) When accounts receivable is considered uncollectible, the person who generally authorizes the write-off
is the:

B . Credit Manager

8) Which document is used to authorize the release of merchandise from the warehouse to shipping?

A . Packing slip

9) An example of an independent verification in the sale process is:

A . Preparation of packing lists on prenumbered forms

10) Which of the following relationships does not violate the rules of segregation of duties?

B . preparation of the sales order and sales invoice

II.
 1. S Credit is authorized by the credit manager.
2. R A cash receipts journal is prepared by the Treasurer’s department.
3. S Collections received by check are received by the company receptionist, who has no additional
recordkeeping responsibilities.
4. R Collections received by check are immediately forwarded unopened to the accounting department.
5. S A bank reconciliation is prepared on a monthly basis by the Treasurer’s department.
6. S Security cameras are placed in the shipping dock.
7. R The billing department verifies the amount of customer sales invoices by referring to the authorized
price list.
8. R Cash collections are deposited in the bank account on a weekly basis.
9. S Customer returns must be approved by a designated manager before a credit memo is prepared.
10. S Account statements are sent to customers on a monthly basis.

III. SHORT ANSWER QUESTION:

1) What would a credit manager do if a sales order received caused a customer to exceed its credit limit?

 The sale should be canceled /rejected. The credit manager must immediately reject the sales order since
the clients are past due on their payments and are unable to bear the burden.

2) What happens after the shipping department verifies that the quantities and descriptions of goods prepared
for shipment are consistent with the sales order?\

 The goods are shipped, an invoice is created and mailed, the sales and general ledger records are
updated, and a month-end statement is created and mailed to the customer. The item is sent to the carrier
together with the packing slip and bill of lading, allowing the cargo to be monitored and a legal contract
to be supported. The Billing Department, on the other hand, will get duplicate copies of the packing list
and bill of lading in order to inform the client of the amount owed and where to make payment.
IV.
Required:
Describe at leats four internal control weaknesses at Marikit Mail Order Co.

1. The warehouse's inventory is being removed.

Without permission from inventory control, the shipping department removed merchandise.
Additionally, the receptionist creates sales return paperwork without the credit manager's
express permission.

2. There is no sales order, and credit must be confirmed before the items are dispatched.

Numerous segregation of responsibilities violations have been made by the corporation, such
as the cashier updating the accounts receivable subsidiary ledger while similarly recording all
cash receipts.

3. The bills should be mailed before the items are shipped; only one person should open the mail.

Because of the company's lax access controls, the shipping department has direct access to the
custody of merchandise.

4. Custody and record-keeping obligations are not separated, and sales return forms are not permitted.

In order for the receptionist to collect cash receipts, manage customer complaints, and
complete sales returns simultaneously, the corporation does not have oversight over the
receptionist or the mail room.