Pro forma Cash Receipt You are to prepare pro forma cash receipt for use in the company’s shops. Pick a sample transaction and show the VAT element separately. Placebo LtdFountain HouseLondonN1 | Cash Receipt #: 123456790 | Date: / / . | Cash received from ______________________________________________________Of £ ______________________________________________________________________For _______________________________________________________________________ | Payment Received in: Cash | | Cheque | | Other | | | | Net | VAT | Total | Amount Due | ........ | | | Amount Received | | | | Balance Paid | | | | _______________________Signed By | Image Source: (Free Receipt Template , 2013) What is a Cash Receipt? A pro forma cash receipt is a document narrating incoming payments from debtors or receivables and is issued by the business or creditor (Cash Receipts Function, 2011).
Sales and Collection Cycle The sales and collection cycle will entail researching of Apollo Shoes journal of sales in search of abnormal transactions and records. The process of this audit test procedures begins when a customer purchases a product from Apollo, and ends with the receipt of the complete payment from the customer. The test of controls the auditors will perform comprises the completeness, accuracy, and classification of transactions and will include accounting for a sequence of shipping documents, observing whether monthly statements are sent, and examining document packaging for internal verification. It will also test of controls for a sequence of shipping documents and the substantive tests will be to compare the date of recording the sale in the sales journal with duplicate sales invoices and bills of lading. Finally, the test of controls for the posting and summarization objective will be to examine evidence that the accounts receivable master file is reconciled to the general ledger and observe whether monthly statements are sent to customers.
There are four types of transactions involved in the inventory and warehousing cycle of Apollo Shoes, Inc., ordering of goods for sale, receipt of the ordered goods, storage of the merchandise, and the shipping of goods to customers. Each of these processes requires that the auditor verify that adequate controls are maintained and that the proper documents are in place for each portion of the process. Therefore, the audit will involve analytical procedures, test of controls and substantive tests on each part of the cycle. Analytical procedure Given the fact that the inventory process will vary between companies, Anderson Olds and Watershed will obtain a thorough understanding of the entire flow of goods from purchase to shipment within the Apollo Shoes organization. Analytical procedures “examine the relationship of inventory account balances with other financial statement accounts” [ (Arens, Elder, & Beasley, 2006, p. 689) ] and are used to “assess the reasonableness of inventory-related balances” [ (Arens, Elder, & Beasley, 2006, p. 689) ].
The revenue is recorded even if cash has not been received or if expenses have been incurred but no cash has been paid. Accrual accounting is the most common method used by businesses. Cash Basis Accounting is the accounting system that recognizes cash when it is received and bills when they are paid. In the Accrual Basis Accounting revenue is recognized when it is earned and expresses when bills are received, regardless of when cash changes hands. Cash bashes only records revenue when cash is received.
Accrual basis on accounting is the method of accounting that most business and professionals are required to use by law because of its matching principles. It provides better picture of a company’s profits during an accounting period. Cash basis accounting is a very simple form of accounting. In cash basis accounting, revenues are recorded when cash is actually received from customers and expenses are recorded when they are actually paid, no matter when they were actually invoiced. According to "Accrual" (2012),” Cash-basis accounting does not recognize promise to pay or expectations to receive money or service in the future, such as payables, receivables, and prepaid expenses”.
* Journalize Transactions – Part of the transaction process, transaction data is entered on the J1 page of the General Journal. * Post to Ledger Accounts – This is used to transfer the journal entries to the ledger accounts; providing balances in various accounts. * Prepare a Trial Balance – Credits and Debits are totaled in order to determine equity before adjustments. The account balances and titles are listed in the order as they appear in the ledger. * Journalize and Post Adjusting Entries – On page J2 of the General Journal expenses incurred and revenues earned, not recorded on daily entries, are recorded.
Audit Program Design Part III Senyo Adiko ACC/546 June 9, 2013 Chandria Jones Audit Program Design Part III During phase III of Apollo shoes audit plan, we will focus on the inventory and warehouse cycle as well as the cash cycle. Cash and inventory are vulnerable to fraudulent activities so it is important to assess the risks of those areas. We are responsible to conduct an unbiased and fair audit according to the PCAOB auditing standards. Our center of interest would be about the objectives of the audit, tests of controls, and substantive tests of transactions. We will also conduct analytical procedures for both cash, and inventory and warehouse cycles.
Included with the statement was a credit memorandum of $185 indicating the collection of a note receivable for Fetter Company by the bank on October 25. This memorandum has not been recorded by Fetter. The company’s ledger showed one Cash account with a balance of $21,877.72. The balance included undeposited cash on hand. Because of the lack of internal controls, Allan took for personal use all of the undeposited receipts in excess of $3,795.51.
Revenues are recorded when cash is received and expenses are recorded when cash is payment. Cash basis does not meet the requirements of accounting principles (GAAP) for it does not recognize the revenue principle and matching principle. Accrual basis accounting method is recognized when revenue is earned, and expenses accrued. Other accounts have to be created to show the difference between and recognized revenue or expenses and the receipt of cash when disburse. Accrual basis accounting is used by the large businesses in the United States, Canada, and in most foreign countries for the statements is prepared according to the generally accepted accounting principle (GAAP).
3. Are the main vendors' account balances verified against the vendors' balances from their own records, at least once per year? Payroll: 1. Are employee addresses and bank account numbers (for direct deposit) checked through accounting software at periodic intervals, to determine that there are no two employees with the same bank account number (which would indicate a fake employee, also called a ghost employee)? 2.