A4.1 Transaction Cycles

1) A receipt of a customer purchase order to the sales department
2) A prenumbered sales order is prepared and
3) Sent to the credit department for approval

1) The credit department determines whether or not the customer may receive goods on open account.
2) If it's approved, a copy of the approved sales order is sent to the Shipping department, the Billing department, and the Accounting department.

1) Shipping receives a prenumbered bill of lading (shipping documents) and
2) A copy is sent to the customer
3) A receivable arises

1) Billing receives a prenumbered sales invoice
2) Shipping documents, sales order, and invoices are compared for validity
3) An invoice is sent to the customer and to the accounts receivable department

The sale is entered into the sales journal and a receiveable is recorded.

1) A receivable is recorded in the AR control account in the GL and in the AR subsidiary ledger.

When payment is received, the receivable is eliminated.

An aging schedule is prepared and sent to the credit department. At some point, they should be written off (which there should be proper segregation of recordkeeping and authorization for).

1) Mail opened by soneone who does not have assess to the AR ledger.
2) Receipt is listed with one copy and the actual one is sent to the cashier to prepare the bank deposit, another is sent to the AR dept for entry in the AR subsidiary records.
3) A third copy is sent to the accounting dept for the GL
4) AR should match the details from the bank deposit tickey with those of the remittance advices.
5) Cash collections should be restrictively endorsed upon receipt and deposited daily.

-Verify thaat recorded sales are based on approved sales orders and shipping documents.
-Compare the sales journal with the subsidiary ledgers.
-Test mathematical accuracy of the TB
-Compare the total in subsidiary ledgers with the GL.

1) Send properly approved prenumbered requisition to the purchasing department

1) Purchasing department places the order only after proper approval.
2) Copies of approval sent to the requisitioning department, the vendor, the receiving department, and the accounting department.

1) Copy of approval serves as authorization to accept goods.
2) Preferable that the document not specify order quantity so they are forced to count the goods at arrival.
3) A receiving report is prepared by this department and forwarded to the accounting department.
4) Goods are forwarded to the requisitioning department.

Functions of AP:
-record the payable
-approve the invoice for payment
-record the payment after it is paid by the Treasurer

1) Copy of the purchase order sent to the accounting department
2) Receiving report is compared with the purchase order and the vendor's invoice.
3) Accounting department records the goods as received in inventory, and records a payable.