ACCOUNTING

INFORMATION SYSTEM

REVENUE
CYCLE
Prepared by:  Mitch Castor
Greeshalynne Habunal
Pamela Morte
Mariel Punzalan
Kriz Tan
OBJECTIVES: Understand the tasks performed in revenue cycle,
regardless of the technology in place

Be able to identify departments involved and trace flow of

revenue transactions through organization

Be able to specify documents, audit trails, promote

maintainance of historical records, support internal
decision-making, and sustain financial reporting

Understand the risks associated with revenue cycle and

recognizez the controls that reduce those risks

Be aware of the operational and control implications of

technology used to automate and reengineer the revenue
cycle
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 WHAT IS REVENUE CYCLE?
The revenue cycle is a term used in
accounting and business that describes
the journey of a product or service from its
humble beginnings to its sale. The
revenue cycle begins when the business
delivers a product or provides a service,
and ends when the customer makes the
full payment.
DATA FLOW DIAGRAM
(DFD)

1 Sales Order Procedures

2 Sales Return Procedures

3 Cash Receipts Procedures

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1 Sales Order Procedures

Sales Order Procedures include the tasks

involved in receiving and processing a customer
order, filing the order and shipping products to
the customer, billing the customer at the proper
time, and correctly accounting for the
transaction.
1 Sales Order Procedures
Includes . . . . .

Received Order
the sales process begins with the receipt of a customer order
indicating the type and quantity of merchandise desired

Sales Order
captures vital information such as the customers name, address, and
account number, the name, number and description of the items sold;
and the quantities and unit prices of each item sold.
FIGURE 4-2
Refer to page 148

SALES
ORDER
1 Sales Order Procedures
Includes . . . . .

CHECK CREDIT
before processing the order further, the customer’s creditworthiness needs to
be established. The circumstances of the sale will determine the nature and
degree of the credit check.

Pick Goods
this document identifies the items of inventory that must be
located and picked from the warehouse shelves.
1 Sales Order Procedures
Includes . . . . .

Ship Goods
before the arrival of the goods and the verified stock release document, the
shipping department receives the packing slip and shipping notice from the
receive order function.

Bill of Lading
formal contract between the seller and the shipping company
(carrier) to transport the goods to the customer.
FIGURE 4-3
Refer to page 150

BILL OF
LADING
1 Sales Order Procedures
Includes . . . . .

BILL CUSTOMER
the shipment of goods marks the completion of the economic event and the point
at which the customer should be billed. Billing before shipment encourages
inaccurate record keeping and inefficient operations.

Sales Invoice
is the customers bill, which formally depicts the charges to
the customer.
Sales Journal
a special journal used for recording completed sales
transactions.
FIGURE 4-4
Refer to page 151

JOURNAL
VOUCHER
includes the details
of sales invoices are
entered in the
journal individually.
 INVENTORY
FIGURE 4-5:
Refer to page 151
SUBSIDIARY
LEDGER
 ACCOUNTS
FIGURE 4-6:
Refer to page 152 RECEIVABLE
SUBSIDIARY
LEDGER
FIGURE 4-1 : DFD OF SALES ORDER PROCESSING SYSTEM
Refer to page 147
2 Sales Return Procedures

Sales returns occurs for number of reasons,

some of which are as follows:
The company shipped the customer the wrong
merchandise
The goods were defective

The product was damaged in shipment

The buyer refused delivery because the seller
shipped the goods too late or they were delayed in
transit.
2 Sales Return Procedures
Includes . . . . .

RETURN SLIP
is a document used when the items are returned.

CREDIT MEMO
is a document used for the authorization for the customer
to receive credit for the merchandise returned.
FIGURE 4-8
Refer to page 154

CREDIT
MEMO
FIGURE 4-7 : DFD OF SALES RETURN PROCEDURES
Refer to page 153
2 Sales Return Procedures
Includes . . . . .

UPDATE GENERAL LEDGER

Debit Credit

Inventory-Control xx
Sales Return and Allowances xx    
Cost of Good Sold xx     
Accounts Receivable-Control  xx
3 Cash Receipts Procedures

Cash Receipts Procedures involves

receiving and securing the cash,
depositing the cash in the bank,
matching the payment with the customers
and adjusting the correct accounts, and
properly accounting for and reconciling
the financial details the transaction.
 3 Cash Receipts Procedures
Includes . . . . .

REMITTANCE ADVICES
contains information needed to service and individual
customer accounts.
includes payment date,account number, amount paid,
and customer check number.
considered as a turnover document as decribed in the
previous chapter.
FIGURE 4-10
Refer to page 157

REMITTANCE
ADVICE
 3 Cash Receipts Procedures
Includes . . . . .

REMITTANCE LIST
Also known as cash prelist. It is a form where the clerk records
each check.

CASH RECEIPTS JOURNAL

It is where the employee records the check after
reconciling the prelist to the checks
FIGURE 4-11
Refer to page 158

CASH RECEIPTS JOURNAL

 3 Cash Receipts Procedures
Includes . . . . .

DEPOSIT SLIP
shows the amount of of the day's receipt and forward this along
with the checks to the bank.

JOURNAL VOUCHER ENTRY
Debit Credit

Cash                                  xx    
Accounts Receivable-Control   xx
FIGURE 4-9 : DFD OF CASH RECEIPTS PROCEDURES
Refer to page 156
PHYSICAL
SYSTEM

Physical accounting information systems

are combination of computer technology
and human activity.
 Demonstrate how
PHYSICAL Illustrate AIS
the internal control
functionality and
SYSTEM 1 workflow patterns 2 profile changes as
the
under different levels
technology/human
OBJECTIVES pf technology.
mix changes.
BASIC TECHNOLOGY REVENUE CYCLE
FIGURE 4-12
Refer to page 160
REFER TO PAGE 160
BASIC
TECHNOLOGY
SALES ORDER
PROCESSING
SYSTEM
shows the processes,
documents, and data
files of a basic
technology sales order
system.
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FIGURE 4-12
Refer to page 161
REFER TO PAGE 160
BASIC
TECHNOLOGY
SALES ORDER
PROCESSING
SYSTEM
(continuation)

Digilib Reader • Literaria Solutions

FIGURE 4-13
Refer to page 162

: STRUCTURES FOR AR
AND INVENTORY
SUBSIDIAY FILES
shows the file structures of
the AR subsidiary and
inventory subsidiary files
in relation to the sales
order document used to
update them.
FIGURE 4-14 : BASIC TECHNOLOGY CASH RECEIPTS SYTEM
Refer to page 164

presents a
system
flowchart
depicting the
cash receipts
procedures,
which begin
in the mail
room.
 ADVANCED
Advanced technologies allow TECHNOLOGY
systems designers to
integrate accounting and REVENUE
other business functions
through a common information CYCLE
system. The objective of
integration is to improve
operational performance and
reduce costs by identifying
and eliminating nonvalue-
added tasks.
INTEGRATED SALES ORDER PROCESSING SYSTEM
Sales Procedures
Includes . . . . .

Access inventory subsidiary file and

01 check the availability of items
STEP requested. Then performs credit
check.

Add record to sale invoice file,

02 transmit digitals stock release
document, sends digital copy of the
STEP packing slip.
Sales Procedures
Includes . . . . .

Warehouse clerk's terminal produces

03 hard copy of the digital document

STEP and picks up the goods and sends it

to shipping department.

Reconcile the goods with the packing

04 slip, prepare for shipment, and
select carrier. After shipment,
STEP transmits digital shipping notice.
Sales Procedures
Includes . . . . .

05 System automatically performs

accounting tasks.
STEP
FIGURE 4-15 : INTEGRATED SALES ORDER SYSTEM
Refer to page 165
INTEGRATED CASH RECEIPTS SYSTEM
INTEGRATED CASH
RECEIPTS SYSTEM
Includes
Mail Room
Cash Receipts Department
Automatic Data Processing Procedures
1 Closes the sales invoice
2 Post to GL accounts
Prepares and distributes various management
3 reports.

Controller's Office
FIGURE 4-16 : INTEGRATED CASH RECEEIPTS SYSTEM
Refer to page 167
REVENUE CYCLE RISKS AND INTERNAL CONTROLS
INTERNAL mitigate the risk from fraud and errors
CONTROL

2 TYPES:
Physical Control
Information Technology Control
PRIMARY RISKS
Selling to un-creditworthy customers

Shipping customers the wrong items or incorrect quantities

Inaccurately recording sales and cash receipts transactions

Misappropriation of cash receipts and inventory

Unauthorized access to accounting records and confidential reports.

Selling to un-creditworthy customers

PHYSICAL CONTROLS
Transaction Authorization
Segregation of Duties

IT CONTROLS
Automated Credit Checking
Shipping customers the wrong items or incorrect
quantities

PHYSICAL CONTROLS
Independent Verification

IT CONTROLS
Scanner Technology
Automated Inventory Ordering
INACCURATELY RECORDING SALES AND CASH RECEIPTS TRANSACTIONS

PHYSICAL CONTROLS IT CONTROLS

Transaction Authorization Data Input Edits
Accounting Records Automated Posting to Subsidiary and GL
Prenumbered Documents Accounts
Special Journals File Backup
Subsidiary Ledgers
General Ledgers
Files
Independent Verification
Misappropriation of cash receipts and inventory

PHYSICAL CONTROLS
Transaction Authorization
Supervision
Access Controls IT CONTROLS
Segregation of Duties
Multilevel Security
 Unauthorized access to accounting records and
confidential reports.
Accounting information is at risk to unauthorized access from
outsiders as well as employees of the organization. Motives for
accessing accounting information includes:

1 Attempt to perpetrate a fraud

2 Theft of data

3 Malicious act
Unauthorized access to accounting records and
confidential reports.

PHYSICAL CONTROLS IT CONTROLS

Access Controls Passwords
Segregation of Duties Multilevel Security
 POINT-OF-SALE SYSTEMS

POS Are used extensively in

grocery atores, department
stored and other types of
retail organizations.
FIGURE 4-17 :POINT OF SALE SYSTEM
Refer to page 175
POS CONTROL ISSUES
Includes.....

POS environment is associated with unique risks that give rise to

the need for additional physical controls.

1 Authorization

2 Supervision

3 Access Control

4 Accounting Records

5 Independent Verification
REENGINEERING
EDI (Electronic Data Interchange)
USING EDI technology was devised to expedite
routine transactions between
manufacturers and wholesalers, and
between wholesalers and retailers.
It represents a strategic business
arrangements between buyer and sellee
in which they agree, in advamce, to the
term of their relationship.
Poses unique control problems for
organization.
REENGINEERING USING THE INTERNET
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OUR TEAM PAMELA MORTE
Director

SALES & RESEARCH GROUP

MITCH CASTOR
MARIEL PUNZALAN
as Mita
as Mara

GREESHALYNNE HABUNAL
Producer
KRIZ NIKKI TAN
Writer