Chapter 14: Audit of Sales & Transaction Cycle – Flashcards
Unlock all answers in this set
Unlock answersquestion
Cash Receipts
answer
Overall objectives and concepts are the same as for sales Potential for theft is great (it is difficult to determine if cash was recorded) Problem: Lapping Procedure: Proof of Cash Audits of each of these cycles can be performed independently of each other, but it is best to do them together if you can
question
Lapping
answer
Postponement of entries for the collection of receivable to conceal an existing cash shortage Why people don't take vacation
question
Proof of Cash
answer
Tests whether all recorded cash receipts have been deposited in the bank Time consuming Prelist TO actual bank deposit list TO cash receipts listed in the journal
question
8 business functions for the sales and collection cycle
answer
(1) Processing customer orders (2) Granting credit (3) Shipping goods (4) Billing customers and recording sales (5) Processing and recording cash receipts (6) Processing and recording sales returns and allowances (7) Writing off uncollectible accounts receivable (8) Providing for bad debts
question
Customer Order
answer
A request for merchandise by a customer
question
Sales Order
answer
A document for communicating the description, quantity, and related information for goods ordered by a customer
question
Shipping Document
answer
Prepared to initiate shipment of the goods, indicating the description of the merchandise, the quantity shipped, and other relevant data
question
Most important aspects of billing
answer
All shipments made have been billed (completeness) No shipment has been billed more than once (occurrence) Each one is billed for the proper amount (accuracy)
question
Sales Invoice
answer
A document or electronic record indicating the description and quantity of goods sold, the price, freight charges, insurance, terms, and other relevant data
question
Sales Transaction File
answer
A computer-generated file that includes all sales transactions processed by the accounting system for a period, which could be a day, well, or month
question
Sales Journal or Listing
answer
A listing or report generated from the sales transaction file that typically includes the customer name, date, amount, and account classification or classifications for each transaction, such as division or product line
question
Accounts Receivable Master File
answer
A computer file used to record individual sales, cash receipts, and sales returns and allowances for each customer and to maintain customer account balances
question
Accounts Receivable Trial Balance
answer
This list or report shows the amount receivable from each customer at a point in time; prepared from the accounts receivable master file
question
Monthly Statement
answer
A document sent by mail or electronically to each customer indicating the beginning balance of their accounts receivable, the amount and date of each sale, payments received, credit memos issued, and the ending balance due
question
Remittance Advice
answer
A document mailed to the customer and typically returned to the seller with the customer's payment
question
Prelisting of Cash Receipts
answer
A list prepared when cash is received by someone who has no responsibility for recording sales, accounts receivable, or cash and who has no access to accounting records; used to verify whether cash received was recorded and deposited at the correct amounts and on a timely basis
question
Cash Receipts Transaction File
answer
A computer-generated file that includes all cash receipts transactions processed by the accounting system for a period such as a day, week, or month
question
Cash Receipts Journal or Listing
answer
This listing or report is generated from the cash receipts transaction file and includes all transactions for a time period
question
Credit Memo
answer
Indicates a reduction in the amount due from a customer because of returned goods or an allowance
question
Sales Returns and Allowances Journal
answer
The journal used to record sales returns and allowances
question
Uncollectible Account Authorization Form
answer
A document used internally to indicate authority to write an account receivable off as uncollectible
