Manual Project Ch 3

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  1. Sales and Cash Receipt Cycle Subcycles 5
    • 1. Sales
    • 2. Cash Receipts
    • 3. Sales returns and allowances
    • 4. Estimate  bad debt expense
    • 5. Write-off of uncollectible accounts
  2. Accountants Objectives 7
    • 1. Record transactions
    • 2. Correct amounts
    • 3. Use chart of accounts classification
    • 4. Proper period
    • 5. Uncollectible receivables  written off
    • 6. Reasonable allowance account valuation
    • 7. Material disclosures in statements  foodnotes
  3. Sales-actions and related documents 5
    • 1.Receive order/ customer purchase order
    • 2. Ship goods/ bill of lading and^or perpetual inventory record
    • 3. Bill Customer/ Sales invoice and price list
    • 4. Record and post  sales / Sales journal and A/R sub. ledger
    • 5. Summarize  journal and post to ledger/ General ledger
  4. Receive order for goods
    The order can be received by mail, sales person, phone, or in person
  5. Customer purchase order
    • Prepared to request goods or services from a customer.
    • Includes: quantity, goods or services desired, and desired delivery or performance date
    • Credit sales requires approval
  6. Ship goods (perform service)
    GAAP requires the recognition of revenue when service is received or when goods were shipped.
  7. Bill of lading
    • Document prepared at the time of shipment
    • Includes: the description of the merchandise, quantity shipped, freight charges, freight carrier, and date of shipment
    • Signed for shipping
  8. Bill Customer
    Billing informs customer of amount owed
  9. Sales invoice
    • Includes: quantity ordered, product #, item, quantity shipped, unit price, total price, total amount of sale, due date of payment, lading #, shipping info, purchase order #, customer account #
    • reviewed for accuracy and initialed
  10. Price list
    • indicates product prices for billing
    • Includes Item #, Desription, Cost, Selling Price

    Approved and signed by management
  11. Record in sales journal and sub. ledger
    Sales are recorded in sales journal (cash sales may be in the cash receipts journal) and posted to AR sub. ledger to customer's account
  12. Sales Journal
    Colums Includes: Date, Customer #, Invoice or Credit Memo #, Sub. Account #, Acct. Receivable, Sales Return, Sales
  13. A/R subsidiary ledger
    A ledger for recording individual sales, cash receipts, and sales returns and allowances for each customer
  14. Summarize sales journal and post to general ledger
    sales journal accounts are totaled and posted to ledger.
  15. Cash Receipts- actions and related documents 4
    • 1. Receive cash/ Remittance advice, cash receipts prelist
    • 2. Deposit cash/ Bank deposit slip
    • 3. Record in Journal & sub. ledger/ Cash receipt journal, A/R subsidiary ledger
    • 4. Summarize journal & post to ledger/ gen. ledger
  16. Receive cash
    GAAP- cognition of cash at receipt date rather deposit or mailing date
  17. Remittance advice
    • accompanies sales invoice mailed to customer and can be returned with payment.
    • Indicates the customer name, sales invoice number, and the amount of the invoice when the payment is received.
  18. Cash receipt prelist
    • prepared when cash is received. Used to  verify amounts and timeliness of recording
    • Includes: Date, description, purpose, Check #, Invoice #, Amount of invoice, amount received
  19. Deposit cash
    deposit to bank  quickly (daily) to reduce loss or theft and make it available for company use
  20. Bank deposit slip
    • accompanies deposits, list checks and currency 
    • bank keeps original and returns  validated copy
  21. Record in cash receipts journal and sub. ledger
    cash receipts transactions are recorded in cash receipt journal and posted to Acct. Receivable sub. ledger to reduce amount owed
  22. Cash receipts journal
    • Record cash receipts from collections, cash sales, and other cash receipts.
    • It shows: Date, description, cash, sales discounts, account receivable, sales, other-Acct # amont 
  23. Summarize journal and post to ledger
    The cash receipts journal is totaled then posted to the general ledger. The other cash receipt accounts are posted individually
  24. Sales Returns and Allowance-Actions and Related Documents 5
    • 1.Process Sales Return and Allow. request/Sales return or allow. request
    • 2. Receive goods (returns only)/Receiving report
    • 3. Credit the customer/Credit memo
    • 4. Record in journal and Sub. ledger/Sales return and allow journal and AR sub. ledger
    • 5.Summarize  journal and post to  ledger/ Gen. ledger
  25. Process sales return and allow request
    Typically approved by a salesperson or sales manager. Parties can negotiation the amount of credit
  26. Sales return and allow. form
    • Includes: Acct #, desired type of refund,quantity, description, reason for return, invoice # & date, signature of authorization
    • once items are return the form is completed with quatity, price, and total of refund
  27. Receive goods (returns)
    GAAP- recognize returns in same period as sale. For convenience some companies do otherwise
  28. Receiving Report
    • Prepared when goods are received
    • Includes: Date, PO or Return #,  freight carrier & bill #, quantity, item #, description, remarks of condition, received by, delivered to
  29. Credit the customer
    inform and agree with customer for the amount of credit
  30. Credit memo
    • Sent to customer showing amount and terms of the return or allowance
    • Includes:  acct #, return req. #, invoice # & date, receiving report #, item #, description, quantiy, price, amount,total, type of refund, prepared by
  31. Record in journal and post to ledger
    Can be a separate journal or part of the sales journal. Shown in separate column if in the sales journal. Posted in account receiveble ledger
  32. Summarize journal and post to ledger
    total journal or column in sales journal and post to general ledger
  33. Estimate of Bad Debt Expense-Actions and related documents 3
    • 1.Determine provision for bad debts/bad debts memo
    • 2. Record in journal/ general journal
    • 3. Post to ledger/ post to ledger
  34. Determine provision for bad debts
    GAAP-recognize bad debts in same period of sale. Often estimated as a percent of gross or net sales from past experience.
  35. Bad Debt Memo
    Not all companies use this document. A separate file is given to show the basis of estimate
  36. Record in journal and post to ledger
    Record in the general journal and post individually to general ledger
  37. Write of Uncollect. Acct. Receivables
    3 Actions and Related Documents
    • 1 Identify uncollect. acct. receivable/ List of uncollectible Acct Recievable
    • 2. Record in journal and sub. ledger/ general journal & Acct. Rec. Sub. ledger
    • 3. Post to ledger / general ledger
  38. Identify Uncollectible Accts
    Usually done by credit manager. Circumstances: bankruptcy, move with no forward address, turned over to collect agency
  39. Record in journal and post to sub. ledger
    record in the general journal and post in the AR sub. ledger
  40. Post to ledger
    Post items from general journal individually to general ledger
  41. Accounts Receivable
    Aged Trial Balance
    What it is
    listing of ending balaces in the AR subsidiary ledger at specifice point in time
  42. Accounts Receivable
    Aged Trial Balance
    Includes 3
    • 1.Customer name and acct number
    • balance due
    • 3. Aging- How much is current according to date of sale to how much is past due by period
  43. Accounts Receivable
    Aged Trial Balance
    Purpose 3
    • 1 reconcile control acct to sub ledger to check recording errors
    • 2. Convenient to help managers see which accts need greater collection efforts
    • 3. Provides justification of the estimate for bad debts
  44. Internal Controls
    5 Authorizations
    • 1. Credit before shipment
    • 2. Ship goods
    • 3. Price to charge
    • 4. credits for returns and write-offs
    • 5. Cash discounts for early payments
  45. 6 Independent checks
    • 1.shippings docs
    • 2.slaes invoices
    • 3.prices on invoice vs price list
    • 4.footing in journals
    • 5.reconcile AR control to Sub ledger
    • reconciliation
  46. Monthly statements to customer
    Provides a check for accuracy in buyer's and seller's records
Card Set
Manual Project Ch 3
Sales and Cash Receipts Cycle
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