AIS-Revenue Cycle
AIS-Revenue Cycle
AIS-Revenue Cycle
Chapter
4-1
Revenue Cycle
Chapter
4-2
Sales Order Process
Chapter
4-3
Salse Order Procedures/Conceptual
System
Receive Order.
The sales process begins with the receipt of a customer order
Chapter
4-4
Salse Order Procedures/Conceptual
System
Check Credit
The credit approval process is an authorization control and
Chapter
4-5
Salse Order Procedures/Conceptual
System
Pick Goods.
The receive order activity forwards the stock release document
(also called the picking ticket) to the pick goods function, in the
warehouse.
This document identifies the items of inventory that must be
goods and verified stock release document are sent to the ship
goods task Chapter
4-6
Salse Order Procedures/Conceptual
System
Pick Goods.
If inventory levels are insufficient to fill the order, a warehouse
employee adjusts the verified stock release to reflect the amount
actually going to the customer.
The employee then prepares a back-order record, which stays on
file until the inventories arrive from the supplier
the warehouse employee adjusts the stock records to reflect the
reduction in inventory.
Chapter
4-7
Salse Order Procedures/Conceptual
System
Ship Goods.
The shipping department receives the packing slip and shipping
notice from the receive order function.
The packing slip will ultimately travel with the goods to the
customer to describe the contents of the order.
The shipping notice will later be forwarded to the billing function
as evidence that the customer’s order was filled and shipped
The shipping clerk reconciles the physical items with the stock
release, the packing slip, and the shipping notice to verify that the
order is correct
Chapter
4-8
Salse Order Procedures/Conceptual
System
Ship Goods.
The shipping clerk packages the goods, attaches the packing slip,
completes the shipping notice, and prepares a bill of lading.
Bill of lading is a formal contract between the seller and the
shipping company (carrier) to transport the goods to the customer
Once the goods are transferred to the carrier, the shipping clerk
records the shipment in the shipping log, forwards the shipping
notice to the bill customer function as proof of shipment, and
updates the customer’s open order file
Chapter
4-9
Salse Order Procedures/Conceptual
System
Bill Customer
The shipment of goods marks the completion of the economic
event and the point at which the customer should be billed
When the customer order is originally prepared, some details
such as inventory availability, prices, and shipping charges may
not be known with certainty
To prevent such problems, the billing function awaits
notification from shipping before it bills
Upon credit approval, the bill-customer function receives the
sales order (invoice copy) from the receive order task. This
document is placed in an pending file until receipt of the shipping
notice, which describes the products that were actually shipped to
Chapter
the customer 4-10
Salse Order Procedures/Conceptual
System
Bill Customer
The completed sales invoice is the customer’s bill
related tasks:
1.Records the sale in the sales journal.
records task.
Chapter
4-11
Salse Order Procedures/Conceptual
System
Accounts Receivable DR
Sales CR
Chapter
4-12
Salse Order Procedures/Conceptual
System
Chapter
4-13
Salse Order Procedures/Conceptual
System
Chapter
4-14
Sales Return Procedures
Chapter
4-15
Sales Return Procedures/
Conceptual System
The buyer refused delivery because the seller shipped the goods
too late or they were delayed in transit.
Chapter
4-16
Sales Return Procedures/
Conceptual System
Chapter
4-17
Sales Return Procedures/
Conceptual System
Chapter
4-18
Sales Return Procedures/
Conceptual System
Chapter
4-19
Sales Return Procedures/
Conceptual System
Chapter
4-20
Sales Return Procedures/
Conceptual System
Chapter
4-21
Cash Receipts Procedures/
Conceptual System
Chapter
4-23
Cash Receipts Procedures
Conceptual System
day’s receipts and forwards this along with the checks to the bank
bank teller validates the deposit slip and returns it to the company
for reconciliation.
Chapter
4-24
Cash Receipts Procedures
Conceptual System
general ledger function reconciles the figures, posts to the cash and
AR control accounts, and files the journal voucher.
Chapter
4-25
Revenue Cycle Controls
Transaction Authorization
Credit Check
This department ensures the proper application of the firm’s
credit policies.
The principal concern is the credit- worthiness of the customer.
Return Policy
The credit department authorizes the processing of sales returns
Segregation of Duties
Transaction authorization should be separate from transaction
1.
processing.
The credit department is segregated from the rest of the process,
so formal authorization of a transaction is an independent event
2.Asset custody should be separate from the task of asset record
keeping.
The cash receipts department takes custody of the cash asset,
Supervision
Supervision of employees serves as a deterrent to dishonest
acts and is particularly important in the mailroom
The individual who opens the mail has access both to cash (the
asset) and to the remittance advice (the record of the transaction).
A dishonest employee may use this opportunity to steal the
check, cash it, and destroy the remittance advice, thus leaving no
evidence of the transaction.
Chapter
4-28
Revenue Cycle Controls
Accounting Records
Accounting Records
Prenumbered documents
(sales orders, shipping notices, remittance advices, and so on) are
sequentially numbered by the printer and allow every transaction to
be identified uniquely.
Special Journals
By grouping similar transactions together into special journals, the
Subsidiary Ledgers
The inventory and AR subsidiary ledgers
The sale of products reduces quantities on hand in the
inventory subsidiary records and increases the customers’
balances in the AR subsidiary records.
The receipt of cash reduces customers’ balances in the AR
subsidiary records.
General Ledgers.
The general ledger control accounts are the basis for financial
statement preparation
Chapter
4-30
Access Controls
An individual with access to both cash and the general ledger cash
account could remove cash from the firm and adjust the cash account
Chapter
4-31
Manual Sales Order Processing
Physical Systems
Sales Department
The sales department records the essential details on a sales
order
Credit Department Approval
The transaction is authorized by obtaining credit approval by
the credit department
When credit is approved, the sales department clerk pulls the
various copies of the sales orders from the pending file and
releases them to the billing, warehouse, and shipping
departments.
Chapter
4-32
Manual Sales Order Processing
Physical Systems
Warehouse Procedures
The warehouse clerk receives the stock release copy of the sales
order and uses this to locate the inventory.
The inventory and stock release are then sent to the shipping
department.
Stock records are adjusted
Chapter
4-33
Manual Sales Order Processing
Physical Systems
The clerk then enters the transaction into the shipping log and
sends the shipping notice and stock release to the billing
department
Chapter
4-34
Manual Sales Order Processing
Physical Systems
Chapter
4-35
Manual Sales Order Processing
Physical Systems
Chapter
4-36
Sales Order Process Flowchart
Chapter
4-37
Sales Order Process Flowchart
Chapter
4-38
Sales Return Procedures/
Physical Systems /Flowchart
Receiving Department
personnel receive, count, inspect for damage, and send
returned products to the warehouse. The receiving clerk
prepares a return slip, which is forwarded to the sales
department for processing
Sales Department
Upon receipt of the return slip, the clerk prepares a credit
memo. Depending on the materiality and circumstance of the
return, company policy will dictate whether credit department
approval (not shown) is required
Chapter
4-39
Sales Return Procedures/
Physical Systems /Flowchart
Chapter
4-41
Cash Receipts Procedures/
Physical Systems /Flowchart
Mail Room
Customer payments and remittance advices arrive at
the mail room, where the envelopes are opened. The
checks are sent to the cashier in the cash receipts
department, and the remittance advices are sent to
the AR department
Chapter
4-42
Cash Receipts Procedures/
Physical Systems /Flowchart
Cash Receipts
The cashier records the checks in the cash receipts journal and promptly
sends them to the bank, accompanied by two copies of the deposit slip.
Periodically, the employee prepares a journal voucher and sends it to
Chapter
4-43
Cash Receipts Flowchart
Chapter
4-44
Cash Receipts
Procedures/Flowchart
Chapter
4-45
Computer-Based Accounting
Systems
Chapter
4-46
Computer-Based Accounting
Systems
Chapter
4-47
Automating Sales Order Processing
With Batch Technology
Chapter
4-48
Automating Sales Order Processing
With Batch Technology
Sales Department
The sales clerk records the essential details and prepares
multiple copies of a sales order, which are held pending credit
approval.
Credit Department Approval
The sales department releases copies of the sales order to the
billing, warehouse, and shipping departments.
Warehouse Procedures
warehouse clerk receives the stock release copy of the sales
order and uses this to pick the goods. The inventory and stock
release are then sent to the shipping department.
Chapter
4-49
Automating Sales Order Processing
With Batch Technology
Shipping Department
The shipping clerk reconciles the products received from the
department.
Chapter
4-50
Automating Sales Order Processing
With Batch Technology
Keystroke
The automated element of the system begins with the arrival of
batches of shipping notices from the shipping department.
These documents are verified copies of the sales orders that
contain information about the customer and the items shipped
The keystroke clerk converts the hard-copy shipping notices to
digital form to produce a transaction file of sales orders
Chapter
4-51
Automating Sales Order Processing
With Batch Technology
EDIT RUN
The system is composed of a series of program runs. The
edit program first validates all transaction records in the batch
by performing clerical and logical tests on the data
Chapter
4-52
SALES ORDER PROCESSING
WITH REAL-TIME TECHNOLOGY
Chapter
4-53
SALES ORDER PROCESSING
WITH REAL-TIME TECHNOLOGY
Sales Procedures
Sales clerks receiving orders from customers process each
transaction separately as it is received.
The system checks the availability of the inventory.
If the credit approve, the system updates the customer current
Chapter
4-54
SALES ORDER PROCESSING
WITH REAL-TIME TECHNOLOGY
Warehouse Procedures
The warehouse clerk’s terminal immediately produces a hard-
copy printout of the electronically transmitted stock release
document.
The clerk then picks the goods and sends them, along with a
copy of the stock release document, to the shipping department.
Shipping Department
A shipping clerk reconciles the goods, the stock release
document, and the hard-copy packing slip produced on the
terminal.
Chapter
4-55
Advantages Of Real-time Processing
Chapter
4-56
Automated Cash Receipts
Procedures
Mail Room
The mail room clerk separates the checks and
remittance advices and prepares a remittance list.
These checks and a copy of the remittance list are
sent to the cash receipts department.
The remittance advices and a copy of the
remittance list are sent to the AR department.
Chapter
4-57
Automated Cash Receipts
Procedures
remittance list
Data Processing Department
At the end of the day, the batch program reconciles the journal
voucher with the transaction file of cash receipts and updates the
AR subsidiary and the general ledger control accounts (AR—
Control and Cash) Chapter
4-58
Automated Cash Receipts
Chapter
4-59
Point-of-Sale Systems
Chapter
4-60
Point-of-Sale Systems
Chapter
4-63
CONTROL CONSIDERATIONS FOR
COMPUTER-BASED SYSTEMS
Authorization
In POS systems, the authorization process involves validating credit
card charges and establishing that the customer is the valid user of the
card
Supervision
In a POS system, where both inventory and cash are at risk.
Customers have direct access to inventory in the POS system, and the
Chapter
4-64
CONTROL CONSIDERATIONS FOR
COMPUTER-BASED SYSTEMS
Chapter
4-65
CONTROL CONSIDERATIONS FOR
COMPUTER-BASED SYSTEMS
Access Control
Inventory in the POS system must also be protected from
achieve this.
steel cables are often used in cloth- ing stores to secure
Chapter
4-66
CONTROL CONSIDERATIONS FOR
COMPUTER-BASED SYSTEMS
Accounting Records
rest on reliability and security of stored digitalized data
Chapter
4-67