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Apollo Accounting and Control Systems: Revenue and Collection Cycle

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Apollo Accounting and Control Systems: Revenue and Collection Cycle

As evident in the company organization chart, Apollo has several departments and offices concerned with management, accounting, and control. The company also has an abbreviated accounting and control manual, although the manual has not been kept up to date. Officers and employees have described accounting and control procedures informally under the heading of several transaction cycles. Their descriptions of the company's current revenue cycle activities appear below.

Credit Approval and Sales Processing

Customer orders are received in the mail, over the telephone, and over the counter by salesclerks in the marketing department. The clerks prepare written sales orders for telephone and counter customers, signing each one and asking the counter customers to sign in person. The sales orders contain the customer name, a customer number (assigned immediately for new customers), customer address, identification of products, and the quantity ordered. The sales order forms are kept in the salesclerks' working area through which many people pass during the day. The sales order documents used in the offices are not prenumbered.

The salesclerks prepare an estimate of the dollar amount of the order and write it on the form. The sales orders are then hand-carried to the credit manager, who is in the treasurer's department. The credit manager checks the customers' accounts receivable balances and other credit file information using a computer-based inquiry system. If credit is approved, the credit manager signs the sales order.

If credit is not approved, the customer is asked to pay in advance, and the sales order is held until notification of payment is received from the cashier. The sales order is stamped "paid" and sent to the billing department. Likewise, when customers pay cash over the counter, the money is taken by the cashier, and the sales order is stamped "paid" and sent to the billing department. For bookkeeping convenience, these "cash" sales are treated the same as credit sales, with the invoice amount being charged to an account receivable set up for the customer, and the customer's payment being applied immediately to the same account.

After credit has been approved, or a payment received, the sales orders are sent to the billing department in the controller's office. The billing clerks produce a four-copy sales invoice on a prenumbered invoice form. Using a screen facsimile on a personal computer, they insert the customer and product information from the customer order, the date, and the product unit prices from an approved price list. Sales taxes, delivery charges, and the invoice total are computed and put on the invoice. The sales invoice forms are kept in a locked closet in the billing department, and sheets in the numerical sequence are removed only for billing clerks' immediate loading onto the computer printer.

Copy 1 and copy 2 of the sales invoice, the customer order, and the sales order are sent to the accounts receivable accounting department, which is also in the controller's office. These documents are held in invoice numerical order in a "pending shipment" file, awaiting matching with copy 4 of the invoice, which was first sent to the inventory stores department as authority for the storeskeeper to put the order together and move it to the shipping department. Copy 3 of the invoice is sent to the shipping department, where it is initially held in a "pending release" file.

Shipment and Delivery

Upon receipt of an invoice copy 4, which serves as the authorization to move goods to the shipping area, the inventory storeskeeper supervises removal of shoe products from shelves and bins. Copy 4 is sent to the shipping area with the products. In the shipping area, shipping employees remove copy 3 from the "pending release" file. They check both copy 3 and copy 4 for the correct quantity of each product, then pack the order in suitable boxes. Copy 3 is sent to the inventory records department in the controller's office, where it serves as the source of entries to reduce the perpetual inventory records. If any items shown on the invoice are not shipped, the handlers are supposed to alter the invoice copies to show the correct quantity.

When customers are on the premises, they can pick up their own orders at the shipping area, where they are asked to sign copy 4 as acknowledgment of receipt. Otherwise, a prenumbered bill of lading is filled out in two copies for shipments by contract truckers. Copy 1 of the bill of lading is attached to the shipment. Copy 2 of the bill of lading is sent with invoice copy 4 to the accounts receivable accounting department.

Apollo Revenue Cycle Flowchart

Apollo Accounting and Control Systems: Purchasing and Expenditure Cycle

The employee prepares a purchase requisition and has a supervisor approve it. The supervisor retains Copy 2 of the pre-numbered purchase requisition for the department, sends Copy 1 to the Purchasing Department and Copy 3 to Accounts Payable.

When the Purchase Department receives the purchase requisition, they search the approved vendor list and consult the listed prices for the goods desired for each vendor. Once a vendor has been selected, five copies of a pre-numbered purchase order are prepared. Copy 5 is retained in the purchasing department and filed with the accompanying purchase requisition. Copy 2 is sent back to the department who prepared the purchase requisition, where both source documents are filed by number together. Copy 3 is sent to the Receiving Department. However, their copy is modified so that the quantity of the items ordered is blacked-out. Copy 4 is sent to Accounts Payable. Copy 1 of the purchase order is sent to the selected vendor.

When the goods are received, the invoice is sent to Accounts Payable and the packing slip is retained in Receiving. The Receiving department verifies the order by comparing the external packing slip with the internal purchase order. Then they count and inspect the items received. The blacked-out purchase order helps to ensure accurate counting of the items ordered. To further assure that the items received are counted, the receiving clerk is required to sign the receiving report. Once the manual process is complete, the inventory file is updated to reflect the goods received and three copies of a pre-numbered receiving report are prepared. Copy 1 and the goods received



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