Question

1. Reference the narrative for Figure 3-12(picture 1) to complete picture 2 the missing labels and data flows.  
   3.12 Charting, Inc., a new audit client of yours, processes its sales and cash receipts documents in the following manner: 1 Payment on account. Each morning a mail clerk in the sales department opens the mail. The mail clerk prepares a remittance advice (showing customer and amount paid) if one is not received. The checks and remittance advices are then for warded to the sales department supervisor, who reviews cach check checks and remittance advices to the accounting department supervisor. The accounting department supervisor, who also functions as credit manager in annroving new credit and all credit limits, reviews all checks for payments on past-duc accounts and then forwards the checks and remittance advices to the accounts receiv. able clerk, who arranges the advices in alphabetical order. The remittance advices are posted directly to the accounts receivable ledger cards. The checks are endorsed by stamp and totaled. The total is posted to the cash receipts journal. The remittance tems Develop advices are filed chronologically. After receiving the cash from the previous day's cash sales, the accounts receivable clerk prepares the daily deposit slip in triplicate The third copy of the deposit slip is filed by date, and the second copy and the original accompany the bank deposit. 2 Sales. Sales clerks prepare sales invoices in triplicate. The original and sec. ond copy are presented to the cashier. The sales clerk retains the third copy in the sales book. When the sale is for cash, the customer pays the sales clerk, who presents the money to the cashier with the invoice copies. The cashier approves a credit sale from an approved credit list after the sales clerk prepares the three-part invoice. After receiving the cash or approving the invoice, the cashier validates the original copy of the sales invoice and gives it to the customer. At the end of each day, the cashier recaps the sales and cash received and forwards the cash and the second copy of the sales invoices to the accounts receivable clerk. The accounts receivable clerk balances the cash received with cash sales invoices and prepares a daily sales summary. The credit sales invoices are posted to the accounts receivable ledger, and then all invoices are sent to the inventory control clerk in the sales department for posting to the inventory control cards. After posting, the inventory control clerk files all invoices numerically. The accounts receivable clerk posts the daily sales summary to the cash receipts and sales journals and files the sales summaries by date. The cash from cash sales is combined with the cash received on account to make up the daily bank deposit. 3 Bank deposits. The bank validates the deposit slip and returns the second copy to the accounting department, where the accounts receivable clerk files it by date. Monthly bank statements are reconciled promptly by the accounting department supervisor and filed by date. Required You recognize weaknesses in the existing system and believe a document flowchart would be beneficial in evaluating this client's internal control in preparing for your examination of the financial statements. a. Complete the flowchart given in Figure 3-12, for sales and cash receipts of Charting, Inc., by labeling the appropriate symbols and indicating information flows. b. Using the guidelines for preparing flowcharts in Focus 3-2 and the flowchart- ing symbols shown in Figure 3-8, critique the flowchart shown in Figure 3-12. List the ways the flowchart violates the guidelines or uses improper symbols. (CPA Examination, adapted)
   

Answer 1

1. Reviews each Check

2. Checks for Payments for past-due accounts

3. Arranges advice in alphabetical order

4. Post directly to accounts receivable ledger cards

5. Third copy of deposit slip

6. File D

7. Approves the sale from credit list

8. Validates the original copy of sales

9. Cash along invoice slips

10. Balances cash receive with cash sales invoices

11. Cash Receipts

12. Inventory control cards

13. Reconciliation of accounts

14. Bank statements

15. File D