Chapter 11 Audit of the Sales and Collection Cycle.doc

Chapter 11 Audit of the Sales and Collection Cycle
Audit of the Sales and
Collection Cycle
Chapter 11
Learning Objective 1
Identify the accounts and the
classes of transactions in the
sales and collection cycle3>.
Accounts in the Sales
and Collection Cycle
Sales
Cash
sales

Sales on
account
Cash in Bank
Cash Discounts
Taken
Sales Returns
and Allowances
Bad Debt
Expense
Accounts Receivable
Beginning Cash receipts
balance
Sales returns
Sales on and allowances
account
Charge-off of
Ending uncollectible
balance accounts
Accounts in the Sales
and Collection Cycle
Accounts Receivable
Beginning Cash receipts
balance
Sales returns
Sales on and allowances
account
Charge-off of
Ending uncollectible
balance accounts
Bad Debt
Expense
Allowance for Uncollectible Accounts
Charge-off of Beginning
uncollectible balance
accounts
Estimate of bad
debt expense
Ending balance
Learning Objective 2
Identify the business functions
and the related documents and
records in the sales and
collection cycle.
Processing Customer Orders
Customer Order:
A request for merchandise
by a customer
Sales Order:
A document describing the
goods ordered by a customer
Sales Transaction
Accounts
Sales
Accounts receivable
Business
Functions
Processing customer orders,
Granting credit, Shipping goods,
Billing customers and recording sales
Documents
and Records
Sales invoice, Sales journal or listing, Sales
transaction file, Accounts receivable master
file and trial balance, Monthly statements
Cash Receipts Transaction
Accounts
Cash in bank (debits from cash receipts)
Accounts receivable
Business
Functions
Processing and recording cash receipts
Documents
and Records
Remittance advise, Prelisting of cash receipts,
Cash receipts transaction file,
Cash receipts journal or listing
Sales Returns and
Allowances Transaction
Accounts
Sales returns and allowances
Accounts receivable
Business
Functions
Pro