SEGREGATION OF FUNCTIONS
Which, if any, of the following situations represent improper segregation of functions?
a. The billing department prepares the customers’ invoices, and the accounts receivable department posts to the customers’ accounts.
b. The sales department approves sales credit memos as the result of product returns, and subsequent adjustments to the customer accounts are per formed by the accounts receivable department.
c. The shipping department ships goods that have been retrieved from stock by warehouse personnel.
d. The general accounting department posts to the general ledger accounts after receiving journal vouchers that are prepared by the billing department.
Segregation of functions
Means the distribution of functions among different individuals or departments so that no single person can control one function from beginning to end.
Segregation of Functions
a. The billing department after approving the customer order by the sales order department and after receiving the shipping information from the shipping department generates an invoice for the customer. Billing brings together and merges the applicable details and issues a bill to the customer and keep posted to the sales journal. Information is transmitted to:
1. Accounts Receivable (A/R)
2. Inventory Control
Thus, the function is properly segregated.
b. The sales department should not be permitted to grant credit memos because it may perhaps possibly make too much of sales in one time period to get together allowances and increases additional benefits or bonuses and turns around them in the following time period.
Thus, the function is improperly segregated.
c. When the customer order is approved then the information is sent to the warehouse and the items are picked from the warehouse by the warehouse personnel and sent to shipping.
Shipping helps in bringing together the goods that are kept in the Warehouse with the sales information on the packing slip.
Thus, the function is properly segregated.
d. A/R, Billing and Inventory Control puts forward review information to the General Ledger department, which is reconciled and sent to the G/L(control accounts).
Thus, the function is properly segregated.