Question

Question 6 –
Transaction cycle 5 marks Alpha Ltd has a reconciliation problem. The amount of cash receipted and banked by the cashier does not seem to agree with the amount allocated against open invoices in the accounts receivable customer records. Alpha Ltd seems to have good controls — it separates the receipting and recording of cash, and it regularly conducts a reconciliation. Required: What documentation should you examine within the revenue cycle in order to investigate this problem?

Answer 1

In the given question, the amount of cash received in bank does not agree with amount allocated against open invoices in accounts receivable customer records. In this context, the documentation that should be reviewed in revenue cycle is:
All the credit sales – to ensure proper accounting of the same and check if any cash sales are recorded as credit sales or vice versa.
Receipts accounted for in customer accounts – to ensure absence of errors while recording receipts against customer accounts.
Ageing analysis of customers – to cross check the amount of bad debts recorded versus cash receipts against those, which are to be accounted as bad debts recovered