peach blossom cologne company soluation
Assignment #3
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
Strength
Segregation of Functions
1. Segregation among sales, stores, shipping, and accounts receivable.
Authorization
2. Credit sales are approved before shipment.
3. Sales orders are approved.
4. Credit memos are approved.
Input Controls
5. Invoices are prenumbered and controlled.
6. Shipping documents are prenumbered.
7. Credit memos are prenumbered and controlled.
Processing Controls
8. Accounts are aged periodically.
9. A record of accounts previously written off is maintained.
10. Customer subsidiary ledgers are reconciled with the control account.
Possible Test of Control
Observe; trace a credit sales transaction through the system (walk-through).
Examine credit manager's initials on sales invoice listing.
Examine sales manager's initials on sales invoice listing.
Examine initials on credit memos.
Account for numerical sequence.
Account for numerical sequence.
Account for numerical sequence.
Examine aging of accounts.
Examine list of accounts. Determine effectiveness of follow-up collection procedures and trace recording of collection into records.
Examine computer generated balancing report.
3. Analysis of Internal Control Weaknesses
CWF-1 Peach Blossom Cologne Company Credit Sales System Internal Control Weaknesses
Weakness
Segregation of Functions
1. Credit manager reports to sales manager.
2. Accounts receivable clerk reports to credit manager.
3. Accounts receivable clerk has access to customer checks and cash prelist.
4. Sales are billed by bookkeeper,
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
Strength
Segregation of Functions
1. Segregation among sales, stores, shipping, and accounts receivable.
Authorization
2. Credit sales are approved before shipment.
3. Sales orders are approved.
4. Credit memos are approved.
Input Controls
5. Invoices are prenumbered and controlled.
6. Shipping documents are prenumbered.
7. Credit memos are prenumbered and controlled.
Processing Controls
8. Accounts are aged periodically.
9. A record of accounts previously written off is maintained.
10. Customer subsidiary ledgers are reconciled with the control account.
Possible Test of Control
Observe; trace a credit sales transaction through the system (walk-through).
Examine credit manager's initials on sales invoice listing.
Examine sales manager's initials on sales invoice listing.
Examine initials on credit memos.
Account for numerical sequence.
Account for numerical sequence.
Account for numerical sequence.
Examine aging of accounts.
Examine list of accounts. Determine effectiveness of follow-up collection procedures and trace recording of collection into records.
Examine computer generated balancing report.
3. Analysis of Internal Control Weaknesses
CWF-1 Peach Blossom Cologne Company Credit Sales System Internal Control Weaknesses
Weakness
Segregation of Functions
1. Credit manager reports to sales manager.
2. Accounts receivable clerk reports to credit manager.
3. Accounts receivable clerk has access to customer checks and cash prelist.
4. Sales are billed by bookkeeper,