Using your knowledge of Boston Beer as well as the process the flow maps that we
ID: 2391609 • Letter: U
Question
Using your knowledge of Boston Beer as well as the process the flow maps that we have reviewed, design the internal controls for their revenue cycle. Justify why each element of your process flow is included.
Purchase Orders, Reconciliation Customer 4 Cash Receipts Recording (Cash Receipts) Collections Deposit Cash in Bank Cash Custody Receivable Recording Sales Authorization Credit Files, Sales Invoice Bill Credit Granting Statements To Customer Warehousing Shipping and Customer Shipping To Cash Receipts Transaction File Accounts Receivable Master File Sales Revenue Account(s) File Perpetual Inventory Records Cash in Bank Cash Receipts Accounts Receivable Allowance for Doubtful Transaction Accounts, Write-Offs Bad Debt Expense Sales Revenue Sales Returns, Allowances, File Shipping Docu Cash Balances Account) File ments (Copy) Perpetual Inventory Records Customer Shipping Records Order Sales Invoice Copy) BankExplanation / Answer
Firstly the Boston Beers receives customer orders. After taking orders from customers the system checks the credit report files and if everything is in order for the customer then the credit is granted and the sales is authorized to the customer. Once the sales is authorized the physical custody of the beer is checked in the warehouse. If the beers are available in the warehouse then the same is shipped to the customer. After shipping the beer to the customer, account receivables are recorded. The customers based on the credit period allowed to them make the payment and the organization receipts cash from the customers by crediting the accounts receivable balance. In respect of the cash receipts the cash is either deposited in the bank or kept in the cash custody of the organization. The customers meanwhile are provided with monthly statements and sales invoices. The master file of account receivable and sales revenue account are accordingly modified to ensure each and every single entry is recorded to give effect to these transactions in the master files. Bank reconciliation statement is prepared regularly to ensure there is no mistake in cash book and bank book of the organization. It is important to remember that at the time of issue of beer from warehouse the inventory of the organization is adjusted in perpetual inventory records of the organization.
From the above it is clear that from initiation of a purchase order from customer to the completion of the transaction by recording the same in the books of accounts Boston Beers has ensured each and every single step is correctly followed.
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