Revenue Cycle
Chapter 4
The Revenue Cycle
Objectives for Chapter 4
• Tasks performed in the revenue cycle, regardless of the technology used • The functional departments involved in revenue cycle activities and the flow of revenue transactions through the organization • The documents, journals, and accounts that provide audit trails, promote the maintenance of records, support decision making, and sustain financial reporting • Risks associated with the revenue cycle and the controls that reduce these risks • The operational and control implications of technology used to automate and reengineer the revenue cycle
Sales Order 1 Credit / Customer Service 2
REVENUE CYCLE (SUBSYSTEM) Cash Receipts/ Collections 6
Shipping 3
Billing/ Accounts Receivable 4/5
Journal Vouchers/Entries How do we get them?
• Billing Department prepares a journal voucher:
Accounts Receivable Sales DR
CR
• Inventory Control Dept. prepares a journal voucher:
Cost of Goods Sold Inventory DR CR
• Cash Receipts prepares a journal voucher:
Cash
Accounts Receivable
DR
CR
Revenue Cycle (Subsystem) Databases
• Master files
– customer master file – accounts receivable master file – merchandise inventory master file
• Other Files
– shipping and price data reference file – credit reference file (may not be needed) – salesperson file (may be a master file) – Sales history file – cash receipts history file – accounts receivable reports file
• Transaction and Open Document Files
– sales order transaction file
• open sales order transaction file
– sales invoice transaction file – cash receipts transaction file
DFD of Sales Order Process
Overview of the Manual Sales Order Processing System
• The sales process begins with a customer placing an order via the sales department. – The sales department captures the essential details on a sales order form. • The transaction is authorized by obtaining credit approval by the credit department. • The sales information is
The Revenue Cycle
Objectives for Chapter 4
• Tasks performed in the revenue cycle, regardless of the technology used • The functional departments involved in revenue cycle activities and the flow of revenue transactions through the organization • The documents, journals, and accounts that provide audit trails, promote the maintenance of records, support decision making, and sustain financial reporting • Risks associated with the revenue cycle and the controls that reduce these risks • The operational and control implications of technology used to automate and reengineer the revenue cycle
Sales Order 1 Credit / Customer Service 2
REVENUE CYCLE (SUBSYSTEM) Cash Receipts/ Collections 6
Shipping 3
Billing/ Accounts Receivable 4/5
Journal Vouchers/Entries How do we get them?
• Billing Department prepares a journal voucher:
Accounts Receivable Sales DR
CR
• Inventory Control Dept. prepares a journal voucher:
Cost of Goods Sold Inventory DR CR
• Cash Receipts prepares a journal voucher:
Cash
Accounts Receivable
DR
CR
Revenue Cycle (Subsystem) Databases
• Master files
– customer master file – accounts receivable master file – merchandise inventory master file
• Other Files
– shipping and price data reference file – credit reference file (may not be needed) – salesperson file (may be a master file) – Sales history file – cash receipts history file – accounts receivable reports file
• Transaction and Open Document Files
– sales order transaction file
• open sales order transaction file
– sales invoice transaction file – cash receipts transaction file
DFD of Sales Order Process
Overview of the Manual Sales Order Processing System
• The sales process begins with a customer placing an order via the sales department. – The sales department captures the essential details on a sales order form. • The transaction is authorized by obtaining credit approval by the credit department. • The sales information is