Fridley Company sells carpeting. Over 50% of all carpet sales are on credit. The following procedures are used by Fridley to process this large number of credit sales and the subsequent collections.
a. A formal ledger is not maintained for customers who sign promissory notes. Fridley simply keeps a copy of each signed note in a file cabinet. These unpaid notes are filed by due date.
b. Fridley employs an accounts receivable clerk. The clerk is responsible for recording customer credit sales (based on sales tickets), receiving cash from customers, giving customers credit for their payments, and handling all customer billing complaints.
c. The general ledger control account for Accounts Receivable is maintained by the General Accounting Department at Fridley. This department records total credit sales, based on credit sale information from the store's electronic cash register, and total customer receipts, based on the bank deposit slip.
d. All credit sales to a first-time customer must be approved by the Credit Department.
Salespersons will assist the customer in filling out a credit application, but an employee in the Credit Department is responsible for verifying employment and checking the customer's credit history before granting credit.
e. Fridley's standard credit period is 45 days. The Credit Department may approve an extension of this repayment period of up to one year. Whenever an extension is granted, the customer signs a promissory note. Up to 15% of the credit sales in any one year are for repayment periods exceeding 45 days.
State whether each of these procedures is appropriate or inappropriate, considering the principles of internal control. If inappropriate, state which internal control procedure is violated.