Solved: Customer checks and remittance advices are

received in the mailroom

Customer checks and remittance advices are received in the mailroom each morning along with
the general mail. Mail volume is typically high requiring a mailroom staff of 40 clerks and one
supervisor. The clerks share equally in the task of sorting the mail and directing it to the
appropriate recipient. In the case of cash receipts the clerks open the envelopes to verify that
the checks are signed and are constant in amount with the remittance advice. The checks and
remittance advices are collected into batches and sent to the Accounts receivable department
where the AR clerk reviews them for correctness, posts to the AR-Sub ledger. The clerk then
prepares two copies of a remittance list. One of these is filed in the department along with the
remittance advice and the other is sent to the cash receipts department with the checks. Finally
the clerk summarizes the batch of cash receipts transaction and post to the general ledger AR-
Control account and the Cash account.

Upon receipt of the checks and remittance list, the Cash Receipts clerk reconciles the
documents and post the checks to the Cash Receipts journal. At the end of the day the clerk
prepares a deposit slip and sends it along with the checks to the bank.

Required:

a. Prepare a flowchart of the cash receipts procedures described

b. Describe the risks, if any that are inherent in the current system configuration.

c. Describe the controls, if any, that are needed to reduce or eliminate the risks identified in (b)
above.

ANSWER
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