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Chapter 12 - Revenue Cycle

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12 views18 pages

Chapter 12 - Revenue Cycle

Uploaded by

Anang Hartanto
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Chapter 12

The Revenue Cycle: Sales to Cash Collections


12-1
Copyright © 2012 Pearson Education
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.

Copyright © 2012 Pearson Education 12-2


The Revenue Cycle

Copyright © 2012 Pearson Education 12-3


The Revenue Cycle

 Provides goods and services to customers

 Collects cash in payment for those sales

 Primary Objective:
 Provide the right product
 In the right place
 At the right time for the right price

Copyright © 2012 Pearson Education 12-4


Revenue Cycle Activities

1. Sales order entry

2. Shipping

3. Billing

4. Cash collections

Copyright © 2012 Pearson Education 12-5


General Revenue Cycle Threats

 Inaccurate or invalid master data

 Unauthorized disclosure of sensitive information

 Loss or destruction of master data

 Poor performance

Copyright © 2012 Pearson Education 12-6


General Revenue Cycle Controls

 Data processing integrity controls

 Restriction of access to master data

 Review of all changes to master data

 Access controls

 Encryption

 Backup and disaster recovery procedures

 Managerial reports

Copyright © 2012 Pearson Education 12-7


Sales Order Entry

1. Take order

2. Check and approve credit

3. Check inventory availability

Copyright © 2012 Pearson Education 12-8


Sales Order Threats

 Incomplete/inaccurate orders

 Invalid orders

 Uncollectible accounts

 Stockouts or excess inventory

 Loss of customers

Copyright 2012 © Pearson Education 12-9


Sales Order Entry Controls

 Data entry edit controls (see  Perpetual inventory control


Chapter 10) system

 Restriction of access to master  Use of bar-codes or RFID


data
 Training
 Digital signatures or written
signatures  Periodic physical counts of
inventory
 Credit limits
 Sales forecasts and activity
 Specific authorization to reports
approve sales to new customers
or sales that exceed a customer’s  CRM systems, self-help Web
credit limit sites, and proper evaluation of
customer service ratings
 Aging of accounts receivable
Copyright © 2012 Pearson Education 12-10
Shipping

1. Picking and packing the order

2. Shipping the order

Copyright © 2012 Pearson Education 12-11


Shipping Threats

 Picking the wrong items or the wrong quantity

 Theft of inventory

 Shipping errors (delay or failure to ship, wrong quantities, wrong


items, wrong addresses, duplication)

Copyright © 2012 Pearson Education 12-12


Shipping Controls

 Bar-code and RFID technology  Reconciliation of shipping


documents with sales orders,
 Reconciliation of picking lists to picking lists, and packing slips
sales order details
 Use RFID systems to identify
 Restriction of physical access to delays
inventory
 Data entry via bar-code scanners
 Documentation of all inventory and RFID
transfers
 Data entry edit controls (if
 RFID and bar-code technology shipping data entered on
terminals)
 Periodic physical counts of
inventory and reconciliation to  Configuration of ERP system to
recorded quantities prevent duplicate shipments

Copyright © 2012 Pearson Education 12-13


Billing

1. Invoicing

2. Updating accounts receivable

Copyright © 2012 Pearson Education 12-14


Billing Threats

 Failure to bill

 Billing errors

 Posting errors in accounts receivable

 Inaccurate or invalid credit memos

Copyright © 2012 Pearson Education 12-15


Billing Controls
 Separation of billing and shipping  Data entry controls
functions
 Reconciliation of batch totals
 Periodic reconciliation of invoices
 Mailing of monthly statements to
with sales orders, picking tickets,
and shipping documents customers

 Reconciliation of subsidiary
 Configuration of system to
accounts to general ledger
automatically enter pricing data
 Segregation of duties of credit
 Restriction of access to pricing memo authorization from both
master data sales order entry and customer
account maintenance
 Data entry edit controls
 Configuration of system to block
 Reconciliation of shipping credit memos unless there is either
documents (picking tickets, bills corresponding documentation of
of lading, and packing list) to return of damaged goods or specific
sales orders authorization by management
Copyright © 2012 Pearson Education 12-16
Cash Collections Threats

1. Theft of cash

2. Cash flow problems

Copyright © 2012 Pearson Education 12-17


Cash Collection Controls
 Separation of cash handling function from accounts receivable and credit functions

 Regular reconciliation of bank account with recorded amounts by someone independent of


cash collections procedures

 Use of EFT, FEDI, and lockboxes to minimize handling of customer payments by


employees

 Prompt, restrictive endorsement of all customer checks

 Having two people open all mail likely to contain customer payments

 Use of cash registers

 Daily deposit of all cash receipts

 Lockbox arrangements, EFT, or credit cards

 Discounts for prompt payment by customers

 Cash flow budgets

Copyright © 2012 Pearson Education 12-18

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