Scribd
Upload
827 views12 pages

The Revenue Cycle:: Sales To Cash Collections

The document discusses the key activities and processes in a company's revenue cycle from sales to cash collection. It describes the basic steps as sales order entry, shipping, billing, and cash collections. For each step it outlines related processing tasks, potential threats to the process, and control procedures to address those threats such as inventory tracking systems, credit limit checks, and segregation of duties. The overall goal is to accurately capture sales, fulfill orders, invoice customers, and collect payments while mitigating risks.

Uploaded by

수지
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
827 views12 pages

The Revenue Cycle:: Sales To Cash Collections

The document discusses the key activities and processes in a company's revenue cycle from sales to cash collection. It describes the basic steps as sales order entry, shipping, billing, and cash collections. For each step it outlines related processing tasks, potential threats to the process, and control procedures to address those threats such as inventory tracking systems, credit limit checks, and segregation of duties. The overall goal is to accurately capture sales, fulfill orders, invoice customers, and collect payments while mitigating risks.

Uploaded by

수지
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 12

MODULE 4:

The Revenue Cycle:


Sales to Cash Collections
Learning Objectives
• Describe the basic business activities and
related information processing operations
performed in the revenue cycle.
• Discuss the key decisions that need to be
made in the revenue cycle, and identify the
information needed to make those decisions.
• Identify major threats in the revenue cycle,
and evaluate the adequacy of various control
procedures for dealing with those threats.

12-4
Basic Revenue Cycle Activities
- Sales order entry
- Shipping
- Billing
- Cash Collections

12-5
Sales Order Entry Processing Steps
✓ Take the customer order
- Source document → sales order
✓ Approve customer credit
✓ Check inventory availability
✓ Respond to customer inquiries

12-6
Sales Order Entry Processing
Threats Controls
• Incomplete/inaccurate orders 1 a. Data entry edit controls
• Invalid orders b. Restrict access to master data to
• Uncollectible accounts maintain accuracy
• Stockouts and excess inventory 2 a. Signature to authorize sale
• Loss of customers 3 a. Credit limits checked and if sale
exceeds limit, specific
authorization needed
4 a. Perpetual inventory system
b. RFID or bar code technology
c. Physical inventory counts

12-7
Shipping Process
• Pick and pack the order
- Source documents → picking ticket

• Ship the order


- Source documents → Packing slip,
Bill of lading

12-8
Shipping Process
Threats Controls
1 a. Bar code technology
• Picking wrong item or quantity to
ship b. Reconcile picking list to sales
order
• Theft
2 a. Restrict physical access to
• Fail to ship the goods inventory
• Ship to wrong address b. Document inventory transfers
c. Physical counts of inventory and
reconcile to quantities recorded
3 a. Reconcile shipping documents
to sales orders, picking lists, and
packing slips
4 a. Data entry edit controls

12-9
Billing Process
• Invoicing the customer
- Source document → sales invoice
• Updating accounts receivable
- Source document → credit memo
and monthly statements

12-10
Billing Process
Threats Controls
1 a. Reconcile invoices with sales
• Failure to bill customer orders and shipping documents
• Billing errors b. Separate shipping and billing
• Posting errors in accounts functions
receivable 2 a. Data entry edit controls
• Inaccurate or invalid credit b. Configure system for
memos automatically enter price data
3 a. Reconcile subsidiary accounts
receivable balance to the
amount for accounts receivable
in the general ledger
4 a. Segregation of authorization
and recording function for
credit memos

12-11
Cash Collection Process
• Process customer payment and
update their account balance
- Remittance

• Deposit payments to the bank

12-12
Cash Collection Process
Threats Controls
• Theft of cash 1 a. Proper segregation of cash
handling and posting to
• Cashflow problems customer accounts, authorize
credit memos, or reconcile
bank account
b. Use lockbox
c. Deposit all cash receipts daily
2 a. Lockbox
b. Discounts for early payment
c. Cash flow budgeting

12-13
Key Terms
• Revenue cycle • Remittance advice
• Sales order • Balance-forward method
• Electronic data interchange (EDI) • Monthly statement
• Credit limit • Cycle billing
• Accounts receivable aging report • Credit memo
• Back order • Remittance list
• Picking ticket • Lockbox
• Customer relationship • Electronic lockbox
management systems (CRM) • Electronic funds transfer (EFT)
• Packing slip • Financial electronic data
• Bill of lading interchange (FEDI)
• Sales invoice • Universal payment
identification code (UPIC)
• Open-invoice method
• Cash flow budget

12-14

You might also like