Assume the following facts: The company invoices customers for sales with an expected thirty-day collection period. The invoice is used to post-sales to the accounting system. Checks are received in...

INDEX
INTRODUCTION
TASK 1
· PLAN 1
· PLAN 2
TASK 2
TASK 3
REFERANCE
INTRODUCTION
In this case scenario, we will discuss about some of the accounting tools and procedures used by a business entity to record their cash sales, credit sales and deposits. We will also go through some of the action plans that can be implemented with the available information and resources to avoid cash defalcation in the entity.
In addition to that, we will go through some adjustments that can be implemented in the entity with the help of improving human resources in the same situation. Finally, we will conclude by stating the best and the most economic action plan in that can be implemented in the entity considering some of the best fraud prevention methods that are being used in the same kind of industry.
TASK 1
Formulating Plan of Action
The first and the foremost task that is assigned is the recommendation of 2 alternative action plans that can be used in the given entity for making the accounting system more effective while recording the cash and credit transactions. However before formulating the action plan we must have a brief understanding regarding the different segments of the accounting system used in the entity. We must also have a brief knowledge regarding the different documents and tools used by the entity for recording each transaction.
An accounting system is a combination of resources including human interventions used in an entity to record financial data in a business environment. Accounting system includes both automatic or computerized and manual recording of data. Most entities are now implementing standardized accounting system in their entity because it will not only help in easy recording of transactions but also in monitoring and improving the activities in the entity’s environment.
In the given case, the accounting entries are recorded in the accounting system on cash receipt basis. However, to recognize the cash, the business unit is using so many underlying documents such as the deposit journal, customer credit journal, deposit slip, etc. Even if this technique is reassuring, it is more time consuming and may have to include more effort for functioning properly. The following are 2 alternative action plans that can be implemented in the entity for smooth and effective functioning and also for faster recording of the transactions in the accounting system.
PLAN-1
Utilize The Ledger Accounts
In the given case, a sales transaction is recorded on the basis of deposit slip received from the bank. The deposit slip is received when the amount received through cheque is deposited at their bank. It will lead to a lot of time lag as it the company has a policy providing credit period for 30 for a credit sale. Alternatively, the entity can use the following action plant to reduce the time lag.
Firstly, the entity must keep proper records of the transaction in their journals and ledger. In the given case, it has mentioned that the entity is mainly using the cash ledger, the accounts receivable ledger and the revenue ledger. However, the entity must make sure to add the sundry creditors ledger, the bank account ledger and the sales ledger before implementing this action plan.
After setting up the above mentioned ledgers in the accounting system, the entity can effectively implement this action plan. It should be as follows.
Record the sales irrespective of whether it is cash or credit in the sales ledger. While recording the transactions, it is necessary to make sure that the credit sales and cash sales are separated appropriately. That is, if the sales for a day include both cash and credit transactions, it is necessary to apportion the whole amount in the respective proportion.
After recording the sales transactions, make sure to enter the amount of credit transactions in the accounts receivable or the sundry creditors account. This will help the entity to examine, monitor and verify the credit sales of the business for a given period. It will also help the entity to record the amount receivable on an accrual basis.
However, while following this method, the entity must make sure to check all the available records before entering an event in the ledgers. This is to make sure that no entries are omitted or reentered in the accounting system.
Advantages Of Plan 1
If an entity is following this method for enter their transactions in the accounting records it will help in setting everything in proper order. This method will also help in timely completion and recording of the necessary financial data. Finally, it will help in reducing the efforts of the personnel engaged in the activity that is otherwise required for using the underlying records such as the deposit journal and the credit slip for entering the event. If an entity is following this method, it will improve the authenticity of the accounting records and also reduce the efforts of the personnel.
PLAN 2
Shorten The Procedure
Presently, the company is following a long procedure for recording its credit sale transactions. This is because if there is a credit sale, the creditor is provided with a 30 days credit period to make the payment. The payment made by this creditor is not received at the sales department but at the mailroom. The mailroom personnel will record the receipt of cheque in the deposit journal and will pass the same to the bank for payment. After the deposit is accepted by the bank, it will issue a deposit slip regarding the same. This document is used by the company to record the cash received from their sales.
Since it is a long process, it will take a lot of effort of the personnel. It will also lead to variations in the amount recorded and the actual amount received for a sale on a credit basis. Therefore the entity can focus on cutting down the procedures. It will not only help in reducing the time but also the risk of misstatements in the recording of the event.
For the activity recording to be more effective, the company can make arrangements to receive...