A good system of internal control requires business entities to have well-documented (written) policies and procedures on
Question:
A good system of internal control requires business entities to have well-documented (written) policies and procedures on accounts receivables. These policies and procedures should cover segregation of duties of staff, credit and collection policies, and the review and reconciliation of accounting records. Segregation of duties of staff should require different employees to perform invoicing, accounts receivable collection, and review and reconciliation of accounting records. Credit and collection policies should establish guidelines covering to whom credit will be granted, the terms of the credit, maximum credit limits, and collection guidelines for any past due accounts. The review and reconciliation of accounting records should establish policies for ensuring that the amount that appears on the balance sheet for accounts receivable agrees with the totals for individual credit customers. Additionally, individual customer accounts should be periodically classified based on the aging of accounts receivable (days from inception of receivable to the reconciliation date). Under each of these internal control policies (segregation of duties, credit and collection policies, and reconciliation of accounting records), describe five accounting controls that you believe would ensure a good system of internal control for accounts receivable.
Step by Step Answer:
College Accounting A Contemporary Approach
ISBN: 9781260780352
5th Edition
Authors: David Haddock, John Price, Michael Farina