Reference no: EM131789031

Assignment

Sales and accounts receivable (adapted from NIVRA)

1. Indicate the essential functions of the accounts receivable administration and the related tasks.

2. Also indicate those internal control measures that need to guarantee a satisfactory execution of these tasks.

3. Describe four ways in which accounts receivable can be recorded.

4. Provide a normative internal control description with respect to the accounts receivable administration for the two organizations described below. Besides the position of accounts receivable, the creation and settlement of receivables deserve specific attention.

Finance company

A finance company grants credits with various terms, partly on security and partly blank. Second or third mortgages are accepted as security. Collateral in the form of cars, boats and the like are accepted as well. Credits may be granted at a fixed interest percentage during the entire credit term, or at percentages which are adapted monthly to market developments.

Monthly installments are either fixed amounts or annuity determined (a fixed sum of installments and interest).

Furniture store

A furniture store sells against cash payment and on account. Sale on account is offered only to clients with a valid machine-readable charge card (badge). The store uses two systems for billing sales on account: monthly invoices or (separate) invoices for each transaction. Monthly invoices are due within one month of the billing date. The other invoices concern larger purchases and are payable in three monthly installments. The store uses a microcomputer for periodic billing and the accounts receivable administration.