peach blossom cologne company soluation
Accounts Receivable and Credit Sales
Part A--Optional Exercises
1. Credit Sales System Flowchart
Peach Blossom Cologne Company
Credit Sales system Flowchart
December 31, 2009
2. Analysis of Internal Control Strengths CSF‑1
Peach Blossom Cologne Company Credit Sales System Internal Control Strengths
Segregation of Functions
1. Segregation among sales, stores, shipping, and accounts receivable.
2. Credit sales are approved before shipment.
3. Sales orders are approved.
4. Credit memos are approved.
5. Invoices are prenumbered and controlled.
6. Shipping documents are prenumbered.
7. Credit memos are prenumbered and controlled.
8. Accounts …show more content…
6. Select several customer accounts at random and test aging (S‑8; W‑1).
7. Randomly select line item entries in sales register for examination. Obtain the sales invoice listing and sales invoices. For the invoices selected:
(a) Examine approval of the sale by the sales manager (S‑3).
(b) Examine initials of credit manager on sales listing for approval of credit limits (S‑2; W‑1).
(c) Compare invoice to posting in accounts receivable detail ledger (W‑3; W-4; W-5).
(d) Trace prices per sales invoice to approved price list (W-7).
(e) Recompute sales invoice for mechanical accuracy (W‑7).
(f) Trace sale to shipping records (S‑3).
7. For each credit memo selected from the sales register:
(a) Examine authorized initials on credit memo (S‑4).
(b) Recalculate the credit memo for mechanical accuracy.
(c) Trace the credit memo to the accounts receivable detail ledger.
(d) Trace items returned to the receiving report, taking note of quantity and date received.
Substantive Tests of Transactions
8. Perform a surprise cash count. Intercept cash receipts and prelist them; trace detail of prelist to accounts receivable subsidiary ledger after posting. Determine whether all cash was deposited intact (W‑3; W‑4; W-5).
9. Select a sample of accounts receivable accounts. Trace credits, other than cash collections,