approval, packing, stock release, shipping, and billing. The credit department provides transaction authorization by approving the customer for a credit sale and returns and allowances. The shipping department receives information from the sales department in the form of packing slip and shipping notice. When the goods arrive from the warehouse, the documents are reconciled with the stock release papers. The goods are packed and labeled. The packing slip is included. The shipping notice is sent to billing. A bill of lading is prepared to accompany the shipment. 5. With regards to segregation of duties, rule one is that transaction authorization and transaction processing should be separated. What does this require in the revenue cycle? 19
Within the revenue cycle, the credit department is separate from the rest of the process. Hence, the authorization of the transaction (granting of credit) is independent. If other people, e.g., sales staff, were able to authorize credit sales, there would be the temptation to approve sales to any customer, even those known to not be credit worthy. 6. With regards to segregation of duties, rule two is that asset custody and record keeping should be separated. What does this require in the revenue cycle? In the revenue cycle, the warehouse has custody of physical assets while accounting (especially general ledger and inventory control) maintains the records. Also, in the cash receipts subsystem, cash receipts has custody of the asset (cash) while general ledger and accounts receivable keep the records. 7. What role does each of the following departments play in the cash receipts subsystem: mail room, cash receipts, accounts receivable, and general ledger? Be complete. The mail room receives the customer's payment-usually a check accompanied by a document called a remittance advice (which may be a copy of the invoice sent to the customer). Mail clerks separate the two, prepare a cash prelist or remittance list which lists all the payments received and sends the checks to the cashier and remittance advices to accounts receivable. In cash receipts someone (e.g., cashier) restrictively endorses the checks and records the payments in the cash receipts journal. A deposit slip is prepared which accompanies the checks to the bank. The accounts receivable department posts from the remittance advices to the customer accounts in the AR subsidiary ledger. The general ledger department records cash receipts to the cash and AR control accounts based on the list from the mailroom and the summary report of posting from A/R. 8. For each of the following documents, describe its purpose, the functional area preparing it, and the key data included: remittance advice, remittance list, deposit slip. A remittance advice is sent by the customer to accompany payment. However, it is often part of or a copy of the invoice previously sent by the billing department after the goods were shipped.
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- Fall '19