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    Transaction Cycles (4B-3) : AUD - Notes Chapter 4

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    kecasti
    The document summarizes the revenue and expenditure transaction cycles. The revenue cycle includes sales, accounts receivable, and cash receipts. Key steps in the sales process include preparing a sales order, obtaining credit approval, shipping goods, billing the customer, and recording the sale. Accounts receivable activities include collection of cash receipts and handling uncollectible receivables and sales returns. The cash receipts process involves collecting payments, depositing funds, and updating accounts. The expenditure cycle begins with a purchase requisition, issuing a purchase order to obtain competitive bids, and receipt of goods or services.

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    Transaction Cycles (4B-3) : AUD - Notes Chapter 4

    Uploaded by

    kecasti
    50 views2 pages
    The document summarizes the revenue and expenditure transaction cycles. The revenue cycle includes sales, accounts receivable, and cash receipts. Key steps in the sales process include preparing a sales order, obtaining credit approval, shipping goods, billing the customer, and recording the sale. Accounts receivable activities include collection of cash receipts and handling uncollectible receivables and sales returns. The cash receipts process involves collecting payments, depositing funds, and updating accounts. The expenditure cycle begins with a purchase requisition, issuing a purchase order to obtain competitive bids, and receipt of goods or services.

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    The document summarizes the revenue and expenditure transaction cycles. The revenue cycle includes sales, accounts receivable, and cash receipts. Key steps in the sales process include preparing a sales order, obtaining credit approval, shipping goods, billing the customer, and recording the sale. Accounts receivable activities include collection of cash receipts and handling uncollectible receivables and sales returns. The cash receipts process involves collecting payments, depositing funds, and updating accounts. The expenditure cycle begins with a purchase requisition, issuing a purchase order to obtain competitive bids, and receipt of goods or services.

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    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    50 views2 pages

    Transaction Cycles (4B-3) : AUD - Notes Chapter 4

    Uploaded by

    kecasti
    The document summarizes the revenue and expenditure transaction cycles. The revenue cycle includes sales, accounts receivable, and cash receipts. Key steps in the sales process include preparing a sales order, obtaining credit approval, shipping goods, billing the customer, and recording the sale. Accounts receivable activities include collection of cash receipts and handling uncollectible receivables and sales returns. The cash receipts process involves collecting payments, depositing funds, and updating accounts. The expenditure cycle begins with a purchase requisition, issuing a purchase order to obtain competitive bids, and receipt of goods or services.

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    AUD - Notes Chapter 4

    http://cpacfa.blogspot.com
    Transaction Cycles (4B-3)
    TIP PIE ACDO – whole chapter 4
    Revenue cycle – includes sales revenues, receivables and cash receipts
    Sales (serially number documents are PAID TIP)
    1. Preparation of sales order – a serially numbered sales order is prepared and sent to the
    credit department
    for approval
    2.Credit approval – valuation assertion, credit department determines (ARC)
    3.Shipment – Shipping department prepares a serially numbered bill of lading (ARC)
    4.Billing – Billing dept. prepares serially numbered sales invoice. Shipping documents, sales
    orders, and
    invoices are compared to ensure that all shipments were based on customer orders and
    properly billed.
    The invoice is then sent to the customer and A/R dept. (ARC)
    5.Accounting – the sale is entered into the sales journal and a receivable is recorded (ARC)
    Accounts receivable
    1. Sales
    2. Collection of cash receipts
    3. Uncollectible receivables – an aging schedule is prepared and sent to the credit department
    for use in
    carrying out its collection program. Auditor observes the preparation of aging schedule to
    support
    assessing control risk below maximum
    4. Sales returns – a serially numbered receiving report may be used as a sales return slip.
    Once the return
    is approved, the related receivable is eliminated
    Cash receipts
    1. Collection – incoming mail must be opened by a person who does not have access to the A/R
    ledger.
    One receipt copy should be sent to cashier (or treasury) for bank deposit. Another copy sent
    to A/R dept.
    for entry into the A/R subsidiary ledger. A third copy should be sent to acctg dept. for entry
    into the
    general ledger
    Testing controls for Sales
    • Inquire about credit procedures for new customers (valuation) (ARC)

    • Compare sales journal to subsidiary ledgers

    • Inspect a sample of prenumbered shipping documents and


    - agree to sales order (existence)
    - account for prenumbered (completeness)

    • Vouch a sample of sales invoices, trace a sample of shipping documents

    • Inspect customer exception file and disposition (existence, completeness, rights and

    valuation)

    • Send confirmations – follow up on error reports (rights and obligations)

    • Test cutoff

    • Test adequacy of uncollectible accounts


    Expenditure cycle
    Purchases
    1.Purchase requisition – the dept. needing an asset or services sends an approved serially
    numbered
    requisition to the purchasing dept
    2. Purchase orders – obtain competitive bids from various suppliers to make sure that the
    best price is
    obtained. Use prenumbered purchase orders
    3. Receipt of goods or services- it is preferable that the copy not indicate the quantity
    ordered (blind copy),
    thus the receiving dept is forced to count the goods upon arrival

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