3.12. Charting, Inc., a new audit client of yours, processes its sales and cash receipts docu- ments in the following manner: 1. Payment on account. Each morning a mail clerk in the sales department opens the mail and prepares a remittance advice (showing customer and amount paid) if one is not received. The checks and remittance advices are forwarded to the sales depart- ment supervisor, who reviews each check and forwards the checks and remittance advices to the accounting department supervisor. The accounting department supervisor, who also functions as credit manager (approving new credit and credit limits), reviews all checks for payments on past-due accounts. He forwards the checks and remittance advices to the accounts receivable clerk, who arranges the advices in alphabetical order. The remittance advices are posted directly to the accounts receivable ledger. The checks are endorsed and the total is posted to the cash receipts journal. The remittance advices are filed chrono- logically. After receiving the cash from the previous day's cash sales, the accounts receivable clerk prepares the daily deposit slip in triplicate. The third copy of the deposit slip is filed by date, and the second copy and the original accompany the bank deposit. 2. Sales. Sales clerks prepare sales invoices in triplicate. The original and the second copy are presented to the cashier. The sales clerk retains the third copy in the sales book. When a sale is for cash, the customer pays the sales clerk, who gives the money to the cashier with the invoice copies. The cashier approves a credit sale from an approved credit list after the sales clerk prepares the three-part invoice. After receiving the cash or approving the invoice, the cashier validates the original copy of the sales invoice and gives it to the customer. At the end of each day, the cashier recaps the sales and cash received and forwards the cash and the second copy of the sales invoices to the accounts receivable clerk. The accounts receivable clerk balances the cash received with cash sales invoices and prepares a daily sales summary. The credit sales invoices are posted to the accounts receivable ledger, and then all invoices are sent to the inventory control clerk in the sales department for posting to the inventory control cards. After posting, the inventory control clerk files all invoices numerically. The accounts receivable clerk posts the daily sales summary to the cash receipts and sales journals and files the sales summaries by date. The cash from cash sales is combined with the cash received on account to make up the daily bank deposit. 3. Bank deposits. The bank validates the deposit slip and returns the second copy to the accounting department, where the accounts receivable clerk files it by date. Monthly bank statements are reconciled promptly by the accounting department supervisor and filed by date. Required You recognize weaknesses in the existing system and believe a document flowchart would be beneficial in evaluating the client's internal control in preparing for your exami- nation of the financial statements. a. Complete the flowchart given in Figure 3-12, for sales and cash receipts of Charting, Inc., by labeling the appropriate symbols and indicating information flows. b. Using the guidelines for preparing flowcharts in Focus 3-2 and the flowcharting sym- bols shown in Figure 3-8, critique the flowchart shown in Figure 3-12. List the ways the flowchart violates the guidelines or uses improper symbols. (CPA Examination, adapted) SALES DEPARTMENT Cashier ACCOUNTING DEPARTMENT Accounts Receivable Clerk Supervisor Supervisor Clerk Mail clerk Mail Open mail Checks Remittance advice Checks Remittance advice Checks Remittance advice Checks Remittance advice Accounts receivable ledger Post Prepare remittance odvice if needed Sales clerks Write invoice for customer order Sales Invoice Retained in soles book Post check Total Sales invoice Soles journal Endorse checks Total cosh and chadles and prepare de posit slip To bank From Cash Post Daily soles summary File D customer To customer Post From Sales Invoice Cash File D Validated deposit slip bank Inventory control derk Sales invoice File IN Post From Monthly bank statement bonk FIGURE 3-12 Charting, Inc., Flowchart for Sales and Cash Receipts 3.12. Charting, Inc., a new audit client of yours, processes its sales and cash receipts docu- ments in the following manner: 1. Payment on account. Each morning a mail clerk in the sales department opens the mail and prepares a remittance advice (showing customer and amount paid) if one is not received. The checks and remittance advices are forwarded to the sales depart- ment supervisor, who reviews each check and forwards the checks and remittance advices to the accounting department supervisor. The accounting department supervisor, who also functions as credit manager (approving new credit and credit limits), reviews all checks for payments on past-due accounts. He forwards the checks and remittance advices to the accounts receivable clerk, who arranges the advices in alphabetical order. The remittance advices are posted directly to the accounts receivable ledger. The checks are endorsed and the total is posted to the cash receipts journal. The remittance advices are filed chrono- logically. After receiving the cash from the previous day's cash sales, the accounts receivable clerk prepares the daily deposit slip in triplicate. The third copy of the deposit slip is filed by date, and the second copy and the original accompany the bank deposit. 2. Sales. Sales clerks prepare sales invoices in triplicate. The original and the second copy are presented to the cashier. The sales clerk retains the third copy in the sales book. When a sale is for cash, the customer pays the sales clerk, who gives the money to the cashier with the invoice copies. The cashier approves a credit sale from an approved credit list after the sales clerk prepares the three-part invoice. After receiving the cash or approving the invoice, the cashier validates the original copy of the sales invoice and gives it to the customer. At the end of each day, the cashier recaps the sales and cash received and forwards the cash and the second copy of the sales invoices to the accounts receivable clerk. The accounts receivable clerk balances the cash received with cash sales invoices and prepares a daily sales summary. The credit sales invoices are posted to the accounts receivable ledger, and then all invoices are sent to the inventory control clerk in the sales department for posting to the inventory control cards. After posting, the inventory control clerk files all invoices numerically. The accounts receivable clerk posts the daily sales summary to the cash receipts and sales journals and files the sales summaries by date. The cash from cash sales is combined with the cash received on account to make up the daily bank deposit. 3. Bank deposits. The bank validates the deposit slip and returns the second copy to the accounting department, where the accounts receivable clerk files it by date. Monthly bank statements are reconciled promptly by the accounting department supervisor and filed by date. Required You recognize weaknesses in the existing system and believe a document flowchart would be beneficial in evaluating the client's internal control in preparing for your exami- nation of the financial statements. a. Complete the flowchart given in Figure 3-12, for sales and cash receipts of Charting, Inc., by labeling the appropriate symbols and indicating information flows. b. Using the guidelines for preparing flowcharts in Focus 3-2 and the flowcharting sym- bols shown in Figure 3-8, critique the flowchart shown in Figure 3-12. List the ways the flowchart violates the guidelines or uses improper symbols. (CPA Examination, adapted) SALES DEPARTMENT Cashier ACCOUNTING DEPARTMENT Accounts Receivable Clerk Supervisor Supervisor Clerk Mail clerk Mail Open mail Checks Remittance advice Checks Remittance advice Checks Remittance advice Checks Remittance advice Accounts receivable ledger Post Prepare remittance odvice if needed Sales clerks Write invoice for customer order Sales Invoice Retained in soles book Post check Total Sales invoice Soles journal Endorse checks Total cosh and chadles and prepare de posit slip To bank From Cash Post Daily soles summary File D customer To customer Post From Sales Invoice Cash File D Validated deposit slip bank Inventory control derk Sales invoice File IN Post From Monthly bank statement bonk FIGURE 3-12 Charting, Inc., Flowchart for Sales and Cash Receipts