Internal Control Procedures for Accounts Receivable

A bookkeeping and accounting system needs internal control procedures for accounts receivable in order to minimize the risk of fraud, error and loss.

The purpose of accounts receivable internal controls is to ensure that sales invoices are properly recorded and that customers pay promptly in accordance with the agreed terms of business.

The internal control procedures for accounts receivable checklist below acts as a quick reference, and sets out the most commonly encountered techniques available when dealing with internal controls for accounts receivable.

Internal Control Procedures for Accounts Receivable Checklist


The business should have well documented policies and procedures on accounts receivable internal controls such as credit and collection policies, to ensure that all staff understand the accounts receivable process.

Segregation of Duties

Segregate the duties of staff. Have different people deal with invoicing, accounts receivable, cash collection, and the review and reconciliation of accounting records.

Receive Purchase Order from Customer

  • Check purchase order prices, terms, and conditions.
  • Check authorization levels for order approval.
  • Check the credit rating of the customer.
  • Check the account balance limits.

Create a Sales Order

  • Compare the sales order and purchase order
  • Stamp the sales order approved.

Prepare Sales Invoice

  • Prepare a prenumbered sales invoice.
  • Check the accuracy of invoice calculations.
  • Check the customers invoice address and promptly send the invoice to the customer.
  • Independently review customer complaints about invoices.
  • Separate the invoicing function from the cash collection function.
  • Reconcile the goods dispatched to the customer to the quantities shown on the sales invoice.

Post the Sales Journal

Post the Accounts Receivable Ledger

  • Post the accounts receivable ledger from a copy sales invoice as soon as the transaction occurs, and file unpaid invoices in invoice date order to ensure invoices are not paid late.
  • Separate the accounts receivable function and cash collection function.
  • Carry out random spot checks on customer trading activity and check for signs of unusual activity.
  • Review credit balances on accounts receivable accounts.
  • Produce an aged accounts receivable report and review the balances, particularly on large and overdue accounts.
  • Have a strict credit control procedure for collecting outstanding accounts receivable.
  • Review all journal entries made to the accounts receivable ledger accounts.
  • Check cash settlements discounts given to customers.
  • Reconcile the accounts receivable ledger with the accounts receivable control account in the general ledger.

This checklist is not exhaustive and each business must develop its own policies and procedures to suit its objectives.

By implementing and using a series of accounts receivable internal controls a business can ensure that the risk of fraud and error is reduced, and that the accounting information produced it is accurate and complete. In this way, the business can be confident in using the income statements, balance sheets, and cash flows statements produced by the bookkeeping and accounting system as a basis on which to make operational decisions.

Internal Control Procedures for Accounts Receivable January 20th, 2017Team

You May Also Like

Related pages

deferred creditsretained earning examplecalculate the payback periodnet account receivable formulaimprest formjournal entries for dividendspayroll accounting journal entriesjournal entry for salary receivedjournal entry for intangible assetstemplates for spreadsheetswhat is revenue expendituresdepreciation formulaslcm accountingunearned revenuespayment formula exceldetailed accounting equationcalculate annuity present valuepetty cash reconciliation form templatecapitalized interest journal entryjournal ledger examplepurchase price variance definitionprepaid journal entriesaccounting quizzesgross redemption yield calculationinternal controls accounts receivablespecimen of debit notenote receivable vs account receivableending inventory overstatedformula to calculate variable costadjusting entry for prepaid insuranceblank income statement and balance sheetinventory turnover calculation formulafreight terms fobjournalize accountingpv annuity factor tabletotal fixed cost formula accountingfob accounting definitionwork out gross profit margintotal labor variance formulacredit and debit chartdefine accrued incomeaverage investment in accounts receivable formulabook keeping equationreasons for material price varianceamortisation of goodwillaccounts receivable questions and answerssimple pay back periodrequisition of materialspresent value of a bond calculatorservices rendered accounting entryoutstanding checks bank reconciliationspreadsheets for small business bookkeepingfixed cost formula accountingspecific identification inventory costing methodpayback analysis calculatorincome statement contribution marginvendor statement reconciliationexamples of general ledger entriesbills receivable account formathow to calculate straight line amortizationimprest fund definitionformula for total asset turnover ratioprepayments in balance sheetinventory valuation examplesfuture value of an annuity equationbasic accounting ledgerhow do i calculate retained earnings on a balance sheetfob shipping point meansaccrued expenses in income statementwhat are the differences between revenue expenditures and capital expenditurespros and cons of reversing entriesvariable expenses examplesequity method of accounting for joint venturesperpetual annuitybank reconciliation statement proformatabel present value lengkap