M4

• ACC 207


  Course code
• Year 2/First Semester


  Year level/Semester
• Course Description


  • Introduces students to the systems that underlie bookkeeping, accounting, financial reporting, tax reporting, and auditing in all business firms
  • Such systems are increasingly complex and in a continual state of flux due to rapidly changing technologies and security risks
  • Students learn about the development standards and practices for accounting information systems
  • Students gain hands-on experience in the use of electronic spreadsheet software for advanced business analysis
  • Students gain hands-on experience with a commercial accounting software package
• Revenue Cycle


  The sequence of activities involved in receiving and processing customer orders, filling those orders, shipping products to customers, billing customers, and collecting cash

  
• Sales Order Procedures


  1. Receive order

  2. Check credit

  3. Pick goods

  4. Ship goods

  5. Bill customer

  
• Sales Order


  Captures vital information such as the customer's name, address, and account number; the name, number, and description of the items sold; and the quantities and unit prices of each item sold

  
• Credit Approval


  An authorization control performed as a function separate from the sales activity
• Picking Goods


  1. Warehouse employee locates and picks the items from the warehouse shelves

  2. Verifies the order for accuracy

  3. Prepares a back-order record if inventory is insufficient

  4. Adjusts the stock records to reflect the reduction in inventory
• Shipping Goods


  1. Shipping clerk reconciles the physical items with the stock release, packing slip, and shipping notice

  2. Packages the goods, attaches the packing slip, completes the shipping notice, and prepares a bill of lading

  3. Records the shipment in the shipping log

  4. Updates the customer's open order file
• Billing Customer


  1. Reconciles the items shipped with those ordered

  2. Adds unit prices, taxes, and freight charges to the invoice copy of the sales order

  3. Records the sale in the sales journal

  4. Forwards the ledger copy of the sales order to the update accounts receivable task

  5. Sends the stock release document to the update inventory records task

  
• Sales Journal


  A special journal used for recording completed sales transactions
• Journal Voucher


  Indicates the general ledger accounts affected by a transaction

  
• Updating Accounts Receivable


  Customer records in the accounts receivable (AR) subsidiary ledger are updated from information the sales order (ledger copy) provides

  
• Posting to General Ledger

  1. The general ledger uses the journal vouchers to post to the Accounts Receivable Control, Cost of Goods Sold, Inventory Control, and Sales accounts

  2. The AR summary is used to verify the accuracy of the journal vouchers from billing

  
• Sales Return Procedures


  1. Prepare return slip

  2. Prepare credit memo

  3. Approve credit memo

  4. Update sales journal

  5. Update inventory and AR records

  6. Update general ledger

  
• Credit Memo


  Authorization for the customer to receive credit for the merchandise returned
• Cash Receipts Procedures


  1. Open mail and prepare remittance advice

  2. Record and deposit checks

  3. Update accounts receivable

  4. Reconcile cash receipts

  
• Remittance Advice


  Contains information needed to service individual customers' accounts, including payment date, account number, amount paid, and customer check number

  
• Remittance advices are a form of a turnaround document that improves operational efficiency by providing necessary account number and posting information
• Cash receipts processing


  1. Mail room routes checks and remittance advices to administrative clerk

  2. Clerk endorses checks "For Deposit Only" and reconciles remittance advices with checks

  3. Clerk records checks on remittance list

  4. Original remittance list sent with checks to record and deposit checks function

  5. Second copy of remittance list sent with remittance advices to update AR function

  6. Third copy of remittance list sent to reconciliation task

  
• Record and deposit checks

  1. Cash receipts employee verifies checks against prelist

  2. Employee records checks in cash receipts journal

  3. Clerk prepares bank deposit slip and forwards with checks to bank

  4. Bank teller validates deposit slip and returns it to company

  5. Cash receipts employee summarizes journal entries and sends voucher to general ledger
• Update accounts receivable


  1. Remittance advices used to post to customer accounts in AR subsidiary ledger

  2. Changes in account balances summarized and forwarded to general ledger

  
• Update general ledger


  General ledger function reconciles figures, posts to cash and AR control accounts, and files journal voucher
• Reconcile cash receipts and deposits

  Clerk compares prelist, deposit slips, and journal vouchers
• Transaction authorization


  • Ensures only valid transactions are processed
• Credit check


  • Credit department ensures proper application of credit policies
  • Evaluates customer creditworthiness
• Return policy


  • Credit department authorizes processing of sales returns
  • Approval based on nature of sale and circumstances of return

  
• Remittance list (cash prelist)

  • Verifies customer checks and remittance advices match in amount
  • Authorizes posting of remittance advice to customer account

  
• Segregation of duties


  • Transaction authorization separate from transaction processing
  • Asset custody separate from record keeping
  • Collusion between multiple individuals required to perpetrate fraud
• Supervision


  • Compensates for lack of segregation of duties
  • Provides control in properly segregated systems
• Accounting records


  • Prenumbered documents
  • Special journals
  • Subsidiary ledgers
  • General ledgers
  • Files
• Access controls


  • Warehouse security
  • Daily bank deposits
  • Secure cash storage
• Independent verification


  • Shipping function reconciles stock release and packing slip
  • Billing function reconciles sales order and shipping notice
  • General ledger function reconciles journal vouchers and summary reports
• Manual systems serve as a visual training aid, reinforce segregation of duties, and provide a framework for viewing technology innovations
• Sales order processing (manual)

  1. Sales department records order details

  2. Credit department approves credit

  3. Warehouse locates inventory and sends to shipping

  4. Shipping department reconciles products, prepares bill of lading, and sends documents to billing

  5. Billing department compiles transaction details, bills customer, and distributes documents

  
• Sales return processing (manual)

  1. Receiving department receives, counts, inspects, and sends returned products to warehouse

  2. Warehouse processes return, updates inventory, and sends documents to billing

  3. Billing department processes credit memo and distributes documents

  
• Billing procedures


  1. Shipping notice received

  2. Billing clerk compiles transaction details

  3. Billing clerk enters transaction in sales journal

  4. Billing clerk distributes documents to AR and inventory control

  5. Billing clerk summarizes transactions into journal voucher
• Sales return procedures


  1. Receiving department receives returned products

  2. Sales department prepares credit memo

  3. Billing records contra entry in sales return and allowance journal

  4. Inventory control debits inventory records

  5. AR clerk credits customer account

  
• Cash receipts procedures


  1. Mail room opens envelopes and sends checks to cashier, remittance advices to AR

  2. Cashier records checks in cash receipts journal and sends to bank

  3. AR department uses remittance advices to reduce customer balances

  4. General ledger department reconciles journal voucher and account summary

  
• Manual systems generate a great deal of hard-copy (paper) documents that need to be purchased, prepared, transported, and stored