Sales are the most important source of revenue in a business and hence the possibilities of errors and frauds taking place are greater.
Frauds maybe committed in the following ways:
• Sales may be omitted from recording in the sales book.
• Fictitious sales may be accounted.
• Sale of fixed assets may be treated as sale of goods.
In order to overcome the occurrence of such type of frauds, an effective system of internal check as regards credit sales is necessary which may be in the following manner.
1. On receipt of order from the customers, it should be numbered and the particulars entered in the order received book.
2. The order copy should be handed over to the dispatch department who makes necessary arrangements for delivery of goods.
3. When the goods ordered are ready for delivery the dispatch department should inspect the goods with the order copy and enter the details of goods delivered in the dispatch memo.
4. The invoice should be prepared based on the dispatch memo in three copies, one copy should be sent to the customer, second copy to the accounts department and third copy will be retained by the sales department.
5. A responsible official should check the particulars in the invoices and also confirm that the terms and conditions in the order have been duly followed and finally he should put his initial on the invoice.
6. The gatekeeper should record particulars of the goods leaving the premises in the goods outward book.
7. The persons who are responsible for preparing the invoices should not be allowed to post the entries in the customer’s accounts.
8. At frequent intervals, the balances in the customers’ accounts should be verified with the confirmations received from the customers.
9. A responsible official should verify that only sale of goods are accounted in sales day book and sale of assets are not accounted.
10. A responsible official should deal with customers enquiries, overdue accounts and writing off bad debts.
Internal Check-Sales Returns
1. The goods returned by customer should be entered in the sales return book and reason for the return should also be recorded.
2. The gatekeeper should also enter the goods received in the goods inward book.
3. A credit note should be prepared, duly checked and initialled by a responsible official.