 In this presentation, we will discuss types of documents and records that will be used within the auditing of revenue process. So we're thinking about the auditing of revenue, the types of documents and records that will be involved. We're going to be listing out the types of documents and records, which can seem like a boring process, but it's a very important process for a couple different reasons. First, a word from our sponsor. Well, actually, these are just items that we picked from the YouTube shopping affiliate program, but that's actually good for you because these aren't things that were just given to us from some large corporation, which we don't even use in exchange for us selling them to you. These are things that we actually researched, purchased and used ourselves. Acer 27 inch monitor. I've been using an Acer monitor as my primary monitor for a few years now. This is the first Acer monitor that I have used after having used a series of different brands of monitors in the past. The Acer monitor has been performing well and I'm trusting the Acer brand more and more as I use the monitor. I have a 27 inch monitor, which I think is ideal for what I do, which is of course the screen recording and the editing. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com where we have many different courses. You can purchase one at a time or have a subscription model given you access to all the courses, courses which are well organized, have other resources like Excel files and PDF files to download and no commercials. One, these are the actual documents that we're going to go through. We're going to have to ask the client for. So we're going to have to go to the client. We're going to have to dig through these types of items when considering the auditing of revenue. We need to know what they are. We need to go and get them. The second thing that's really important here is because most accounting, many people that go through the accounting process, learn the debits and credits much better or more detailed than they learn the related documentations to it. And therefore they don't, oftentimes when we go through the accounting process and we learn accounting, we may actually have the financial transactions in terms of debits and credits down a lot more than the documentation that is related to it. Auditing is a great practice that gets us in tuned with what are the documentations related to the financial transactions that are involved. We need that of course for the auditing process, but we also need it if we're just doing business or we're working on the GL side of things or just working with accounting software because all these things are going to basically use this type of documentation in order to trigger the financial transaction, the debit and credits that we have learned. So we have to understand the documentation so that we can understand how to apply the debits and credits into an accounting system, into the accounting software. And that's something that many students pick up in the auditing type of process. So type of documents and records. We've got the credit approval form credit approval form for credit sales. So if we have a credit sale, obviously a sale on credit, we haven't gotten cash up front, the entity must have a formal process to determine if the customers are credit worthy. This is obviously oftentimes going to be some type of thing that we want to check into depending on the type of industry we are in the sales process that they may have might have a high degree of basically non payment in it. And if there's a credit approval process, we want to make sure that the credit approval process is in place so that there's more likelihood than of course if you have the credit approval that the payment will be received when you make sales on account. Customer sales order shows the details of the type and quantity of products or services ordered by the customer. So that's going to be the customer sales auditor again shows the details of the type and quantity of products or services ordered by the customer. Then we have the open order report. This is going to be important for the auditor a report for all customer orders where processing has not been completed. So if we have some kind of system where there's going to be items where the processing has not yet been done, we need to know what the open order report is because if the work has not yet been done typically we shouldn't be recording the revenue until the point in time that the work has been done. So we need to know what the system is when the revenue is going to be recognized when the work is done so that we can test that system. We have the shipping document typically serves as a bill of lading. It has information on the type of product shipped, the quantity shipped and other relevant information. So we want to basically be able to check those shipping documents because the shipping documents if we're talking about goods that are being shipped out are often the point that we are going to recognize basically the revenue. In other words, the revenue for goods that are being sold typically happens when the goods are delivered in some format. The goods are delivered. How do we test when the goods are delivered? Well, if the goods are shipped from a warehouse or something like that, we would need to be able to look at the shipping document. And that's going to be one way that we know the quantity of goods as well as when the shipping actually took place and therefore be able to tie that out and consider when revenue was recognized. Then we have the sales invoice used to build the customer contains information on the type of product or service, the quantity, the price and the terms of the trade. So obviously the sales invoice is our invoice. So we usually call it an invoice from our side to the customer. It's going to be the bill, right? And we're sending out the invoice to the customer. They are receiving the bill. Therefore, this is going to be usually the point in time with a lot of accounting software might trigger a sales process recording revenue at the point of time the invoice happens. But note that that really if they're shipping goods, the revenue should be recorded at the point of time that the shipment happens or when some type of delivery happens, whether it be FLB shipping or FLB destination. So we're going to have to be looking at the relationship between these types of items and when the system, the accounting software is recording the revenue with relation to them and see if there's any kind of timing difference issues that we need to consider. Then we have the sales journal after sales invoice has been issued, the sales need to be recorded in the accounting records. The sales journal is used to record information about the sales transactions. So the sales journal will be a specialized journal that's just going to show the basically the sales type of reports. This might be a report that we'll have to print out. If we're using accounting software, we might have to ask for basically a sales journal, a sales report. The names can differ. Note that when we go to different types of industry, different types of companies, they may have different names. The accounting software may generate reports in different types of formats. So we need to understand, you know, what the general name is of the report and what it is that we're looking for on it so that when we get the report, we can recognize that we have indeed gotten the information that we need if even if it's not by the same name. Then we have the customer statement mailed to the customers has details of all sales cash receipts and credit memorandum memorandum transactions accounts receivable subsidiary ledger. This is obviously going to be really important when we consider the sales process and consider the auditing of accounts receivable itself has an account and detail of transactions for each customer. So the subsidiary ledger remember when we think about accounts receivable, of course, we've got accounts receivable representing what is owed to the company by customers. We then break that out by not just the GL by date as all accounts are broken out on the general ledger by date, but also by subsidiary ledger, the subsidiary ledger breaking it out by customer. So now we have the same detail broken out by customer. That's going to be important, of course, for accounts receivable accounts receivable aging report summarizes all customer balances in accounts receivable subsidiary ledger. Each account is classified as either current or placed into one of several past due categories. So this is a similar type of process the on the on the balance sheet, we got accounts receivable that represents what is owed to the company by customers. Then we're going to break that out by by customer subsidiary ledger, but also an aging report subsidiary ledger type report, which will break out who owes us the money, but also break it out by how old that money is or how past due it is. Is it current? Is it 30 days past due? Is it 90 days past due? That'll help us to value the accounts receivable and see if the collections are actually happening in a timely manner with regard to the sales on account remittance advice. Part of the customer's bill that is returned with the payment. So when we think about the remittance, when we receive a bill like a utility bill in the mail or something like that, that little slip that you're supposed to fill out the amount and then send it back, that's going to be important within the return internal controls process. Because when that goes back to the system, that remittance you can have a check in the envelope, you can have the remittance that will then come back. And those two things will typically be recorded and go to different departments and be recorded as a form of check in balance. So when we're testing the internal controls, so it's going to be an important document, cash receipts journal used to record the cash receipt of the entity. So we'll have the cash receipts journal. Again, with an accounting software, it might be that we're going to be asking for some type of report with relation to the cash receipts journal, which may not be named exactly the cash receipts journal, but obviously we're looking for a report that has cash receipts on it. Credit memorandum used to record the return of goods by customers. So this is going to be important for the recording of revenue as well, because the credit memorandum, which is usually something that many times within even the accounting process that you ask the bookkeeper or the people in the accounting department, what's the journal entry behind the credit memorandum? They don't really know, right? It's obviously because it's backwards, it reverses the sales. So we have to understand that the credit memorandum is typically going to be the reversal. There's going to be some type of return and therefore it's the easiest way to think about it. The transaction related to it is going to think about the sales transaction that will typically be reversed and then make any kind of adjustments such as sales instead of sales, you've got the sales returns and allowances. So anyways, the credit memorandum form can be a little bit confusing to analyze when you have those returns because most of the times when we think about accounting and we think about the sales process and the return is a little bit backwards in our mind. So credit memorandum, we have the write-off authorization, authorizes the write-off of an uncollected accounts receivable. Final approval is often done by the treasurer.