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Dynamics GP – Cash Receipts Application System

Overview

This is an application system used to control the flow of information and documents regarding cash receipts. Most of a company’s cash receipts are generated though sales. Sales, of course, may be made either for cash or on account. Although sales accounts are handled through the company’s billing and collection system, the end product of sales on account and subsequent billings is the receipt of cash.

Cash Received on Account Application System

In order to have appropriate internal control on receipt of cash the company should separate the followings functions.

Mailroom

Customer remittances on account are received in the mailroom. The mail is opened and the checks and remittance advices are separated. Checks are restrictively endorsed and totaled. A remittance list that documents the payments received is prepared. The remittance list is balanced to the total of the checks received, and the agreement of these amounts is approved. A copy of the remittance list and the remittance advices are forwarded to accounts receivable. The checks and a control total are forwarded to cash receipts for deposit. A copy of the remittance list and the control total are filed by date. 

Cash Receipts

The basics objective in any cash receipts application is to minimize exposure to loss. Procedures such as immediate deposit of receipts intact centralization of cash handling, maintenance of minimal cash balances and immediate recording of cash transactions are fundamental control techniques. Physical safeguards such as cash registers, vaults, immediate endorsement of checks, and limited access to cash areas are generally necessary as well.

Checks received from the mailroom are combined with cash receipts, and a deposit slip is prepared in three copies. The remittance slip and control total received from the mailroom are balanced to the deposit slip, and the agreement of these amounts is approved. The remittance list is then used to post the amount of the payments received from the mailroom into the cash receipts journal. A journal voucher is prepared and forwarded to the general ledger. The remittance list, control total, and a copy of the deposit slip are filed by date. The deposit is for warded intact to the bank.

Accounts Receivable

The remittance advices are posted to the accounts receivable ledger. The postings to the ledger are totaled. The control total is balanced to the remittance list. The agreement of these amounts is approved. The remittance advices are sorted and filed by customer. The remittance list and a copy of the control total of postings are filed by date. A copy of the control total is forwarded to the general ledger.

General Ledger

The journal voucher from cash receipts and the control total received from accounts receivable are compared. The amounts are then posted to the general ledger. The source of posting the general ledger is the cashier’s journal voucher notification of the amount of the deposit of the payments received. This amount must agree with the total of items posted to the accounts receivable ledger. The journal voucher and the control total are filed by date. 

Bank

The bank accepts the deposit and validates a copy of the deposit slip. The validated copy of the deposit slip is returned to Internet audit. The validated deposit slip is filed by date.

Internal Audit

Internal audit receives the periodic bank statement. Independent bank reconciliation is a significant control in a cash-received on account application system.

To control incoming cash received through the mail, it is important that no one in the mailroom (where the correspondence is opened), in the cashier’s office (where the money is summarized and a deposit prepared), or in the accounts receivable section (where the assert reduction is recorded) has complete control over the transaction. In many systems, the invoice or statement that is sent to a customer is prepared in such a way that the portion with the name and address of the customer is returned with the payment. This is common with telephone, utility, and department store invoices, and provides good documentation for the payment

The source of posting the general ledger is the journal voucher notification issued by the cashier indicating the amount of the deposit of cash receipts. This amount must agree with the accumulated total of the items posted to the subsidiary receivable file. Validated copies of the deposit slip go to the internal auditor, who uses them when reconciling the ban account. The control of actual cash (as opposed to checks) received by mail relies largely on direct supervision.

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