Preparer: TTT 19-Jan-18

Reviewer: [ ]

Revenue Control Documentation (1351.100) 1520 1/7

Objective of Documentation of the Accounting System

In order to plan and execute the audit, the auditor is required to obtain a sufficient understanding of the
control environment and the systems that collect, record, and process data, and report the resulting
information. The documentation of the accounting system can be completed through the use of
narratives, flow charts or a combination thereof. This form provides a basic tool of system features that
should be considered when documenting our knowledge of the accounting system. Understanding the
accounting system would include an understanding of the critical point within the cycle when the
recording of the transaction is initiated (e.g. when the order is made, when the goods are received,
when the invoice is recorded, or when cash is disbursed). Complete this documentation as relevant to
the account balance or transaction class. If more room is needed, attach additional explanations as
necessary to document your understanding.

Understanding the internal control system and preliminary control risk assessment include the following
major functions:

A. Order entry
B. Credit authorization
C. Shipment of goods
D. Invoicing and revenue recognition
E. Receipts
F. Credit notes, returned goods discount

Documentation
For each process, provide the following information:
 The person/position responsible for performing the procedure
 The person/position authorizing the transaction
Remarks:
The company has 2 following sources of revenue:
1) Cash sales from Joma café. There are 5 café namely: Namphou, Phonethan, Thatluang (in VTE) & Hoxian,
Namkhan (in LPB)
2) Wholesale revenue: from selling of Joma products to other café, to management & staff (at 25% discount for
normal products & 75% for returned products).
A. Order Entry ○i

No. Process description Comment and/or Ref.

Done by who (Preparer and Approver)
a)
How is source document created,
b) retained, and approved for processing
How does the order get processed in the
c) system, including interfaces between the
systems
Operator only: Cashier of each café
(2 shifts per day)
Source document: Sales Order
- Cashier post items ordered by customer to POS
system.
- After customer pays, bill is printed out to send to
customer and copies of sale order are printed in
other printers in kitchen, bar.
- Cashier collects money before printing out the
bill.
- There’re printers at kitchen, bar connected with
POS system directly. If the inventories in the
POS are available to make the order, the order

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 Preparer: TTT 19-Jan-18
Reviewer: [ ]

Revenue Control Documentation (1351.100) 1520 2/7

No. Process description Comment and/or Ref.

will be posted to POS and printed out as a bill.

- When bill/order printed, other copies also printed
from printer at kitchen & bar.
- Orders are kept at cashier and at kitchen till the
end of shift.

B. Credit Authorization <only apply for credit delivery at café>

No. Process description Comment and/or Ref.

Done by who (Preparer and Approver) Preparer: Production Manager (Mr.Pe)

Approver: Country Manager (Mr.Jeff)

a)
Operator: Staff scheduled in café (can be cashier)

Customer phone to café directly to order. Operator will

answer phone, taking order from customer
Source document: Delivery Order
After receiving call from customer, operator/cashier
opens a delivery order in the POS system.

How is source document created, used, Source document: Pre-bill

b) and approved for processing
How does the credit authorization get
c) processed in the system, including
interfaces between the systems
- After opening order, operator/cashier makes a pre-
bill into POS system.
- Printers in kitchen/bar print out the order for
preparing food/drink
- Orders printed in kitchen/bar are kept till the end of
this shift.
Joma has contracts with wholesale customers that
states the credit for each customer. Credit was
approved by CM (Mr.Jeff), followed by PM (Mr.Pe)
and operated by staffs in cafes
There are 2 kinds of customer who call for delivery
order:
- Wholesale customer: get credit but not longer than
a month
- Other customer: pay when receive goods

C. Shipment of goods ○i <only apply for credit delivery at café>

No. Process description Comment and/or Ref.

Done by who (Preparer and Approver) Preparer: Delivery operator
Delivery Driver

a) Approver: Supervisor
After making goods, operator will give delivery driver
goods, bill and information of customer to deliver the
goods.

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Period End: 31-12-2017 19-01-2018 10:13 AM

Revenue Control Documentation (1351.100)
No. Process description
How is source document created, used,
b)
and approved for processing
How does the shipment get processed
and recorded in the system, books and
c)
ledgers, including interfaces between the
systems
How is the information compiled and
d) reported in management reports and
financial statements
D. Invoicing and Revenue Recognition ○i
No. Process description
Done by who (Preparer and Approver)
a)
How is source document created, used,
b)
and approved for processing
How does the invoice get processed and
c)
recorded in the system, books and
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1520 3/7
Comment and/or Ref.
Source document: Bill
A bill will be printed out from POS after posting order.
For pay-when-receive customer: customer gets the bill
together with goods and pay money to the delivery
driver.
For credit customer: customer receives a bill to keep,
and sign in another receipt with the same information
when receive goods.
When money or receipt is brought back to café,
operator/cashier will close this order.
The sales to customer who pays when receive goods
are recorded into POS system and cashier report in
this shift
The value of credit deliveries are recorded into to the
revenue account at the day arising when the PM (Ms.
Pe) receives the receipts from café.
Delivery orders are captured in the POS system like
normal orders. Issued Delivery orders are tracked on
the system.
Comment and/or Ref.
Preparer: Junior Finance Assistant
Finance Assistant
Approver: Accountant
Source document: Cashier Report
- Cashier’s report is made daily at the end of day.
- It’s sent together with daily cashier report and other
supporting document to Accounting department.
Source document: Summary Daily Cashier Report
- Junior Finance Assistant checks and makes
the Summary Daily Cashier report,
- Finance Assistant re-checks and keeps the
Summary together with Cashier report.
Source document: Tax Receipt
- Junior Finance Assistant issues retail tax
receipt daily for the total sale of day. Tax
receipt for wholesale customer must be
reviewed by accountant before issuing to
customer
- After checking and matching information,
Finance Assistant post the amount of revenue
FAC HN
19-01-2018 10:13 AM
 Preparer: TTT 19-Jan-18
Reviewer: [ ]

Revenue Control Documentation (1351.100) 1520 4/7

No. Process description Comment and/or Ref.

ledgers, including interfaces between the account into MYOB in USD, LAK, THB
systems separately after deducting VAT (rate 10%)
- Accountant
- Revenue is recorded every day after Finance
Assistant received Cashier Report from
Cafes.
How is the information compiled and
- Director makes his own POS report every 15
d) reported in management reports and
days from POS main server. Finance
financial statements
Assistant has to compare it with the revenue
recorded in MYOB and find out the reason for
any material difference.

E. Receipts ○i

No. Process description Comment and/or Ref.

Done by who (Preparer and Approver)
a)
How is source document created, used,
b)
and approved for processing
How does the receipt get processed and
recorded in the system, books and
c)
ledgers, including interfaces between the
systems
How is the information compiled and
d) reported in management reports and
financial statements
Preparer: Cashier
Approver: Café Supervisor
To Cash revenue: Cashiers at Café collect from
customer directly when making order
To Delivery revenue: Delivery Driver or via Bank.
Source document: Cash Report
- After finish counting at the end of shift, cashier
records total amounts counted in respective
currencies in "Cashier Report" and initial on the
report
- Cash sales from the previous day's evening shift
and the morning shift of the following day is
deposited following day. Cash deposit bank slip is
obtained and sent back to Finance Dept together
with other supporting documents.
Finance Assistant debits cash at bank when revenue
recorded. For credit sale, it’s will be record into trade
receivable account and reduce when customer make
payment.
Every month (or half of month), accountant compares
between revenue and cash at bank with bank
statement to ensure they are match and find out
reason and solution for any difference

F. Returned Goods, Discounts ○i <N.A>

No. Process description Comment and/or Ref.

Done by who (Preparer and Approver) Preparer: Cashier

a) Approver: CM (Mr.Jeff)

Controller: Café Manager/Supervisor

Joma Bakery Cafe Sole Co., Ltd [31/12/2017] FAC HN

Period End: 31-12-2017 19-01-2018 10:13 AM
 Preparer: TTT 19-Jan-18
Reviewer: [ ]

Revenue Control Documentation (1351.100) 1520 5/7

No. Process description Comment and/or Ref.

Source document: Bill
- When making order for Joma staff, cashier makes
a discount of 25% posting to POS system (or
discount 75% for expiry goods – seldom happens
because all expiry goods have to be transferred
back to Factory).
At the end of each shift, staffs have to count
How is source document created, used, goods on shelf and report to Café manager. Café
b)
and approved for processing manager control the number of goods left and
control quality and expiry date of goods. If there’s
any expired goods, they are not allowed to be sold
and have to be returned to Factory.

- Returned goods (seldom) due to customer doesn’t

take goods as ordered will be put in POS and sell
as normal goods
How does the returned goods and
discounts get processed and recorded in
c)
the system, books and ledgers, including
interfaces between the systems
How is the information compiled and
d) reported in management reports and
financial statements

Documents and Records

These are the important documents and records that are normally involved in the revenue process as
discussed here to give the reader information on documents and records that might exist in a revenue
process. The reader should keep in mind that in advanced IT system some of these documents and
records may exist for only a short period of time or may be maintained only in machine-readable form.

Customer Sales Order – This document contains the details of the type and quantity of products or
services ordered by the customer. For example, order entry personnel enter the mailed or faxed
information from customer sales orders into the revenue system. Phone or Internet sales are entered
directly into the data validation program.

Credit Approval Form – The client should have a formal procedure for investigating the
creditworthiness and establishing a credit limit for customers. The result of this procedure should be
documented on some type of credit approval form. The amount of the credit limit should be documented
on the approval form. When credit limits are included in the client’s computer files, the approval forms
represent the source documents authorizing the amounts contained in the information system.

Open-Order Report – This is a report of all customer orders for which processing has not been
completed. In the typical revenue process, after the goods have been shipped and billed, the order
should be noted as filled. The open order report should be reviewed daily or weekly to identify old but not
billed orders or to determine why orders have not been filled. Testing for shipments for which the
customer has not been billed provides evidence as to the completeness objective.

Shipping Document – A shipping document, prepared anytime goods are shipped to a customer,
generally serves as a bill of lading and contains information on the type of product shipped, the quantity
shipped, and other relevant information. A copy of the shipping document is sent to the customer, while
another copy of the shipping document is used to initiate the billing process.

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Sales Invoice –This document is used to bill the customer. The sales invoice contains information on the
type of product or service, the quantity, the price, and the terms of trade. The original of the sales
invoice, prepared from the information on the shipping document, is usually forwarded to the customer,
and copies are distributed to other departments within the organization. The sales invoice is typically the
source document that signals the recognition of revenue.

Sales Journal – Once a sales invoice has been issued, the sale needs to be recorded in the accounting
records. The sales journal is used to record the necessary information for each sales transaction.

Customer Statement – This document is usually mailed to a customer monthly. It contains the details of
all sales, cash receipts, and credit note transactions processed through the customer’s account for the
period.

Accounts Receivable Subsidiary Ledger – The accounts receivable subsidiary ledger contains an
account and the details of transactions with each customer. For computerized systems, this information
is maintained in the accounts receivable file.

Aged Trial Balance of Accounts Receivable –This report, which is normally prepared monthly,
summarizes all the customer balances in the accounts receivable subsidiary ledger. Customers’
balances are reported in categories (such as, less than 30 days, 30-60 days, 60-90 days, more than 90
days old) based on the time expired since the date of the sales invoice. The aged trial balance of
accounts receivable is used to monitor the collection of receivables and to ensure control account that
the details of the accounts receivable subsidiary ledger agree with the general ledger. The auditor uses
this report for conducting much of the substantive audit work in accounts receivable and in the
assessment of the adequacy of the client’s allowance for doubtful accounts.

Cash Receipts Journal – This journal is used to record the entity’s cash receipts.

Credit Note – This document is used to record credits for the return of good in a customer’s account or
to record allowances that will be issued to the customer. Its form is generally similar to that of a sales
invoice, and it may be processed through the system in the same way as a sales invoice.

Write-Off Authorization – This document authorizes the write-off of an uncollectible account. It is

normally initiated in the credit department, with final approval for the write-off coming from the CFO.

Major Functions

A/R Ledger Maintenance and Financial Reporting

The recording and reporting functions should be an integral part of each process:

Accounts Receivable – The accounts receivable function is responsible for ensuring that all billings,
adjustments, and cash collections are properly recorded in customers’ accounts receivable records.
Any entries in customers’ accounts should be made from authorized source documents such as
sales invoices, remittance advices, and credit note. In an IT system, the entries to the customers’
accounts receivable records may be made directly as part of the normal processing of these
transactions. The use of control totals and daily activity reports provides the control for ensuring that
all transactions are properly recorded. The accounts receivable function is normally performed within
the billing department or a separate accounts receivable department.

General Ledger – The main objective of the general ledger function in terms of a revenue process is
to ensure that all revenues, collections, and receivables are properly accumulated, classified, and
summarized in the accounts. In an IT system, the use of control or summary totals ensures that this
function is performed correctly. The accounting department is normally responsible for this function.

Guidance for question A

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The initial function in the revenue process is the entry of new sales orders into the system. It is important
that sales or services be consistent with management’s authorization criteria before entry into the
revenue process. In most entities, there is a separate order entry department.

Guidance for question B

The credit authorization function must determine that the customer is able to pay for the goods or
services. Failure to perform this function properly may result in bad-debt losses. In many entities,
customers have preset credit limits. The credit authorization function must ensure that the credit limit is
not exceeded without additional authorization. Where credit limits are programmed into the computer
system, a sale that causes a customer’s balance to exceed the authorized credit limit should not be
processed. The system should also generate an exception report or review by the credit function prior to
further processing. Periodically, each customer’s credit limits should be reviewed to ensure that the
amount is consistent with the customer’s ability to pay.

The credit authorization function also has responsibility for monitoring customer payments. An aged trial
balance of accounts receivable should be prepared and reviewed by the credit function.

Guidance for question C

Goods should not be shipped, nor should services be provided, without proper authorization. The main
control that authorizes shipment of goods or performance of services is payment or proper credit
approval for the transaction. The shipping function must also ensure that customer orders are filled with
the correct product and quantities. To ensure timely billing of customers, completed orders must be
promptly forwarded to the billing function. The shipping function is normally completed within a separate
shipping department.

Guidance for question D

The main responsibility of the billing function is to ensure that all goods shipped and all services provided
are billed at authorized prices and terms. The entity’s controls should prevent goods from being shipped
to customers who are not being billed. In an IT system, an open-order report should be prepared and
reviewed for orders that have not been filled on a timely basis. In other systems, all prenumbered
shipping documents should be accounted for and matched to their related sales invoices. Any open or
unmatched transactions should be investigated by billing department or sales department personnel.

The billing function is also responsible for handling goods returned for credit. The key control here is that
a credit note should not be issued unless the goods have been returned. A receiving document should
first be issued by the receiving department to acknowledge receipt of the returned goods.

Guidance for question E

The collection function must ensure that all cash collections are properly identified and promptly
deposited intact at the bank. Many entities use a lockbox system, in which customers’ payments are sent
directly to the entity’s bank. The bank then forwards a file of cash receipts transactions and remittance
advices to the entity. In situations where payments are sent directly to the entity, the cheques should be
restrictively endorsed and a “prelisting” or control listing prepared. All cheques should be deposit daily.

Guidance for question F

The main responsibility of the billing function is to ensure that all goods shipped and all services provided
are billed at authorized prices and terms. The entity’s controls should prevent goods from being shipped
to customers who are not being billed. In an IT system, an open-order report should be prepared and
reviewed for orders that have not been filled on a timely basis. In other systems, all prenumbered
shipping documents should be accounted for and matched to their related sales invoices. Any open or
unmatched transactions should be investigated by billing department or sales department personnel.

The billing function is also responsible for handling goods returned for credit. The key control here is that
a credit note should not be issued unless the goods have been returned. A receiving document should
first be issued by the receiving department to acknowledge receipt of the returned goods.

Joma Bakery Cafe Sole Co., Ltd [31/12/2017] FAC HN

Period End: 31-12-2017 19-01-2018 10:13 AM