Question

A small medical supply company sells cash only the cash sale procedure involves several steps
• The sales clerk prepares a pre-numbered sales invoice in triplicate. The sales clerk takes copy 1 and 2 together with the payment and present them to the cashier
• The cashier validates the original copy and gives it to the customer
• The third copy of the sales invoice stays in the invoice book when the invoice book has been depleted all 3rd copy of the invoices is filed in the sales office. “by invoice books”
• At the end of each day the cashier prepares a Sales summary, a deposit slip in duplicate and counts the cash. He or she takes the cash to the Bank and deposit it. The cashier retains a copy of the deposit slip the other copy is validated by the bank.
• The cashier then gives the accountant the sales summary, the 2nd copy of the invoices and the validated deposit slip.
• The accountant agrees the numbers prepare the journal entry
Files the documents as follows
Sales summaries by date
Invoices by number
Deposit slip by date
Journal vouchers by number

Required
1. Prepare a document flowchart for the processe
2. What weakness in the controls do you see? List them
3. Suggest enhancements to the internal control

Answer 1

ANSWER:

1) Flowchart will be made as follows:

Sales Clerk--> Triplicate Invoice --> Customer (takes copy) --> Sales Summary --> Bank (amount deposited)

2) Since the Sales Clerk prepares the invoioces, he does not record the invoices in its data or system and same prepare invoice in triplicate. Later this invoice is tranferred to cashier to Prepare sales summary. Later on the deposit slips are made in duplicate, one is handed kept with cashier and other handed over to bank. Then the Account Summary to the accountant.

3) In this process, The Accountant intervention is in last stage where the summary is been given to him.
If the Accountant is allow to recieve the deposits slips and the copies of invoices, their would less chances of error and mistake in the transactions and the fraud which could arise would be minimal.
The Internal Controls would have been stronger by Applying this technique.