CASH RECEIPTS PROCEDURES

Good day to all of you, I am now reporter and I will be presenting to you the second subsystems which is
the cash receipts procedure, as dicussed earlier we have two subsystems, sales order and cash receipts,
under sales order diba we described a credit transaction that resulted in the establishment of an
account receivable. And in some instances, Payment on the account, is due at some future date. And
thus, this apply the cash receipts procedure. Under cash receipts procedure it involves involve receiving
and securing the cash; depositing the cash in the bank; matching the payment with the customer and
adjusting the correct account; and properly accounting for and reconciling the financial details of the
transaction.

Payment on the account is due at some future date, which the terms of trade determine. Cash receipts
procedures apply to this future event. They involve receiving and securing the cash; depositing the cash
in the bank; matching the payment with the customer and adjusting the correct account; and properly
accounting for and reconciling the financial details of the transaction.

And It also involves the following main procedures:

• So nagsisimula tayo dun sa pagOpen Mail and Prepare Remittance Advice (usually yun
mail ditop is reffering to the cash payment or yun check coming from customer,
together with remittanace advice, so later on we will discuss yan remittance advice.

• Next is, an individual Record the receipt of cash payment and eventually Depositing the
Checks in the bank.

• Afterwards will Update Accounts Receivable

• And also Update General Ledger

And To further understand those processes , discuss naten yan 1 by 1

Next slide!

OPEN MAIL AND PREPARE REMITTANCE ADVICE

• So ditto nagsisimula yun pagprocess naten ng cash recipts when we are receving the cash
payments or checks and also yun remittance advices coming from the customer in a mail room
department.

a mail room employee opens envelopes containing customers’ payments and remittance
advices. ditto sa ,mail room department narereceived yun mga checks na galling sa customer
together with remittance advice. *(so yun remita advice ditto is might be reffering to a original
customer invoice/sales invoice)

• Remittance advices contain information needed to service individual customers’ accounts.

This includes payment date, account number, amount paid, and customer check number

• And take note that a remittance advice is a form of a turnaround document.

| The customer receives a perforated two-part bill or statement. The top portion is the actual
bill, and the bottom portion is the remittance advice. Customers remove the remittance advice
and return it to the company along with their payment (typically a check)|

. Errors are avoided and operational efficiency is greatly improved when using remittance
advices.

• Mail room personnel route the checks and remittance advices to an administrative clerk who
endorses(sign) the checks ‘‘For Deposit Only’’ and reconciles the amount on each remittance
advice with the corresponding check. Then it Will be forwarded that in the cash recipts function
together with the remittance prelist

• Next slide

RECORD AND DEPOSIT CHECKS

Then after naten ma recived yun payments or checks and remittance advice and ma reconcile yun
laman ng check is we record it and deposit the checks to the bank

• An here, A cash receipts employee verifies the accuracy and completeness of the checks against
the prelist na nanggaling dun sa administrative clerk.

• Afterwards, All cash receipts transactions, including cash sales, miscellaneous cash receipts, and
cash received on account, are recorded in the cash receipts journal.

• Then, The clerk prepares a bank deposit slip showing the amount of the day’s receipts and
forwards this along with the checks to the bank.

• Then after ma forward nun clerk yun mga checks and deposit slip dun sa bank, The bank teller
validates the deposit slip and returns it to the company for reconciliation.

Next slide

UPDATE ACCOUNTS RECEIVABLE

Continuing with the process, yun accounts receivable naman is being updated

• And here, gamit yun remittance advice, we post now to the customers’ accounts in the AR
subsidiary ledger.

• Then, any changes in account balances are summarized and forwarded to the general ledger
function.

Also periodically, a summary of the postings is sent to the general ledger. For posting and
reconciling purposes.

Next slide

UPDATE GENERAL LEDGER

• So si general ledger dept Upon receipt of the journal voucher and the account summary coming
from the cash receipts dept and ar dept, the general ledger function reconciles the figures, posts
to the cash and AR control accounts, and after ma reconciles yun mga amount sa cash and ar
account then mag ffiles na ng journal voucher yun general ledger dept.

Then, after ma deposit yun check and ma record yun cash receipts then ditto na papasok yun
bank reconciliation. Although hindi sya integral part ng process within the cash receipts
procedure but this is to remind you lang hindi sa pagtanggap ng cash or checks natatapos yun
pagprocess natin ng cash receipts procedure, there lots of process and separated jobs needed in
order to validate and complete the process.

So kung iaanalyse nyu yun processes, marami yung process na hiwawalay or doble dpoble yun
gumagawa it is because that here in revenue cycle under cash receipts procedure segregation of duties
is an important internal control sa isang company so in the following slides, we will dicuss yan mga
internal control na yun.

Next slide

CASH RECEIPTS PROCEDURES (ENTRY)

So here is a sample entry upon receviving the cash from the customer

Cash xxx

Accounts Receivable xxx

And also the following are the documents that discussed earlier are needed for us to process the cash
receipts: so those are

1. Remittance Advice- use for verification and also to update the AR subsidiary ledger

2. Checks- which are reconciles to the remittance pre list and are to be deposited to the bank

3. Deposit Slips- which are prepared by the cash receipts department and will be forwarded to the bank
for deposit and also use for bank reconciliation

Next slide

And ito yun pinaka summary ng cash recipts procedure na nadiscuss naten kanina using data flow
diagram, so diba magsisimula tayo sa pagrecevive naten ng cash and remit advice kay customer, then
after that, I sesend natin sa cash recipts dept and magrerelease sila ng remitrtance pre list then after
that update natin yun ar susidary ledger and also record and deposit yun checks na na received from
that department then lastly update yun general ledger records and reconciles the amount deposited.
Next slide

so diba kanina nabanggit ko yun segration of duties sa cash receipts procedure which is important
internal control within the cycle, so we needed those revenue internal control to help us to safeguard
yun mg assets naten specifiucally cash and inventories and to avoid any fraud schemes and theft that
could be possibly happening in a certain cycle specially here in revenue cycle.

And showing here yun six classes of internal control activities that guide us in designing and evaluating
transaction processing controls. They are transaction authorization, segregation of duties, supervision,
accounting records, access control, and independent verification. So lets dicuss it briefly.

First yun transactions authorization, and under sales processing kailangan naten ng authoriuzation
kapag nagakkaroon tayo ng credit check sa credit department and also sa sales return procedure since
diba nga nadicuss natin kanina sa sales return procedure na it needed an authorization before we
process yun return ng goods.

Sa segregation ng duties naman undefr sales processing credit shall be separated from processing…

Sa supervision control naman, since wala nakalagay sa sales processing ibig sabihin hindi na ganun
kailangan yun supervision control since properly segregated naman yun mga processes and yun mga
accounting records however when it comes in cash reciepts processing, sa mail room deptpartment yun
dapat na may supervision since kase dyan nagsstart yun pagreceived naten ng pera or checks together
with the remittance advice so kung walang nag ssupervise sa mail room employee dun then madali nya
lang makukuha yun pera or yun check then ang gagawin nya is pipilasin nya yun remittance advice so in
that way makukuha nya yun cash without any controls na meron dun sa company unless may cctv na
lang dun sa dept nay un.

When it comes in accounting records naman under sales processing we needed yun mga sales order…

Meanwhile yun access both on sales and cash recipts should have a limited access in inventory as well as
dun sa cash and also yun mga corresponding accounting records, kase if hindi limited yun access sa mga
assets na yan, so possibly it will be prone or susceptible to theft and fraud

And last but not the least is yun independent verification, so when it comes in sales processing,
verification should occur in… kase once na ma detect naten na may errors na dyan sa mga department
nay an madali na naten maccorect or ma ssolustionan yun mga errors nay un.

So to further discussed those internal control lets dicussed it one by one.

AUTHORIZATION CONTROLS

Take note that in order to have a valid transactions to be processed, it needed an Proper authorization
of transactions or documentation.

• Proper authorization of transactions (documentation) should occur so that only valid

• a sale is made on credit (authorization)

• a cash refund is requested (authorization)

• posting a cash payment received to a customer’s account (cash pre-list)

SEGREGATION OF FUNCTIONS

Three Rules:

• Transaction authorization should be separate from transaction processing.

• Asset custody should be separate from asset record-keeping.

• The organization should be so structured that the perpetration of a fraud requires collusion
between two or more individuals. So dapat an organization should carry out those possible acts
like yun collusion or yun pagaagreehan ng like for example yun employee resposinble sa dept
and supervisor so pwedeng mag agree sila na gumawa ng fraud or theft.

And also as we discussed earlier

Sales Order Processing

• credit authorization separate from Sales Order processing

• inventory control separate from warehouse

• accounts receivable sub-ledger separate from general ledger control account

Cash Receipts Processing

• cash receipts separate from accounting records

• accounts receivable sub-ledger separate from general ledger

SUPERVISION

• Often used when unable to enact appropriate segregation of duties. Gaya nung nadiscuss naten
kania dun sa sales processing na appropriate naman yun segration of duties.

• And also, Supervision of employees serves as a deterrent to dishonest acts and is particularly
important in the mailroom. So kung magaassign man tayo ng employee dun sa dept nay un sa
cash receiving function dapat ang iassign naten is yun employee na may pinakahonest and
integrity na character and if not then magakkaroon lang tayo ng problems and maaring
magkulang yun resources naten.

ACCOUNTING RECORDS

And also another internal contril is yun mga accounting records naten

With a properly maintained audit trail, it is possible to track transactions through the systems and to
find where and when errors were made: just like etu mga
 • pre-numbered source documents

• special journals

• subsidiary ledgers

• general ledger

• files

so with those accounting records mas madali naten ma ttract yun mga transactions, and mas maaga
naten makikita kung may errors ba tayo dun sa mga processes and also ma eenhance pa nito yun
efficiency ng process naten kapag nagkkeep tayo ng mga records na yun.

ACCESS CONTROLS

So when it comes in access controls naman, kailangan yun pag access naten sa mga assets like
cash and inventory ay limited lamang .

It is important bec,,,

• Within the revenue cycle, the assets to protect are cash and inventories and alam naman naten
nay an mga assets like cash and inventory are susceptible to fraud and theft and in order for that
to avoid those acts, access to records such as the accounts receivable subsidiary ledger and cash
journal should be restricted. So in some other company na gumagamit ng computerized system,
and way nila ng pag access ng assets like cash is using password or code wherein that specific
person lang ang nakakaalam.

INDEPENDENT VERIFICATION

-And last from the internal control is the INDEPENDENT VERIFICATION

So under INDEPENDENT VERIFICATION

Physical procedures as well as record-keeping should be independently reviewed at various points in the
system to check for accuracy and completeness: like

• In Shipping dept, it should verify the goods sent from the warehouse which are those correct in
type and quantity

• Also the warehouse should reconciles the stock release document (picking slip) and packing slip
to avoid mistakes in the shipment

• Then also, the billings shall also be reconciles with the shipping notice along with the sales
invoice

• Finally, the general ledger should reconciles the journal vouchers from billing, inventory control,
cash receipts, and accounts receivable.

So that will ba all for my part, and the next reporter is my beautiful bff Ms. Kristian denise maglipon.

Everybody, Thank you so much for listening.