Tag (SQ): Sales Ledger

Thompson Tools
Mr. Thompson, a client of your firm, is the managing director of Thompson Tools, which buys tools from large manufacturers and sells them to small retailers.
As the firm has been expanding, Mr. Thompson has recently purchased a computer. He has asked your advice about the controls which should be exercised over the computer when processing accounting data. Initially, Mr. Thompson is proposing to use the computer for producing sales invoices and maintaining the sales ledger.
The sales system data files will comprise:

• a standing data file containing customer names, addresses, and credit limits and a price file containing the part numbers, descriptions, and selling prices of the company’s products
• transaction files containing the outstanding transactions for each customer’s account, the values of individual invoices, credit notes, cash, discounts, and adjustments posted to the sales ledger in the month and the ageing and the total balance on each customer’s account.
  The system will operate as follows:
  The customer details, and the part numbers and quantities of the goods dispatched are input into the computer, which calculates the invoice value by accessing the standing data file. When the operator confirms that the invoice details have been input correctly, the computer prints the invoice and posts it to the sales ledger.
  Cash received and discounts are input into the system from the cash book, and they are matched to the invoices which are being paid.
  Credit notes and adjustments can be input directly into the sales ledger.
  At the end of the month, the computer prints:
• a summary of the invoices, credit notes, adjustments, cash, and discounts posted to the sales ledger in the month;
• an aged list of receivables; and
• customer statements, which show the outstanding transactions at the end of the month.
  The computer has the facility to print out during the month the summaries as described above, and the details of any customer account.
  Required
  (a) List and describe the procedures which should be carried out in setting up the files containing:
  (i) the customer names, addresses, and credit limits;
  (ii) the price list of the products the company sells; and
  (iii) sales ledger balances which are to be transferred from the manual system to the new computer system.

(b) List and describe the controls which should be exercised over:
(i) the input of transaction data, to ensure the risk of misstatements is minimised and that there is no unauthorised input of transactions;
(ii) the amendment of standing data files containing customer names, addresses, and credit limits; AND
(iii) the amendment of the prices of the products the company sells.

(c) List and describe the procedures which should be carried out to ensure the accuracy of the transaction file data, which contains balances on customers’ accounts and the outstanding transactions making up those balances.