Accounting Essay 2 pages must answer all questions
noel001
romney_ais14_stppt_12.pptxAccounting Information Systems
Fourteenth Edition
Chapter 12
The Revenue Cycle: Sales to Cash Collections
Copyright © 2018 Pearson Education, Inc. All Rights Reserved
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Learning Objectives (1 of 2)
Describe the basic business activities in the revenue cycle and discuss the general threats to that process and the controls that can be used to mitigate those threats.
Explain the sales order entry process, the key decisions that need to be made, and threats to that process, and describe the controls that can be used to mitigate those threats.
Explain the shipping process, key decisions that need to be made, and threats to that process, and describe the controls that can be used to mitigate those threats.
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Learning Objectives (2 of 2)
Explain the billing process, key decisions that need to be made, and threats to that process, and describe the controls that can be used to mitigate those threats.
Explain the cash collections process, the key decisions that need to be made, and threats to that process, and describe the controls that can be used to mitigate those threats.
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Basic Revenue Cycle Activities
Sales order entry
Shipping
Billing
Cash Collections
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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General Threats and Controls to Revenue Cycle
Threats
Controls
Inaccurate or invalid master data
Unauthorized disclosure of sensitive information
Loss or destruction of data
Poor performance
1 a. Data processing integrity controls
b. Restrict access to master data
c. Review of all changes to master data
2 a. Access controls
b. Encryption
c. Tokenization of customer personal information
3 a. Backup and disaster recovery procedures
4 a. Managerial reports
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Sales Order Entry Processing Steps
Take the customer order
Source document: sales order
Approve customer credit
Check inventory availability
Respond to customer inquiries
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Sales Order Entry Processing
Threats
Controls
Incomplete/inaccurate orders
Invalid orders
Uncollectible accounts
Stockouts and excess inventory
Loss of customers
1 a. Data entry edit controls
b. Restrict access to master data to maintain accuracy
2 a. Signature to authorize sale
3 a. Credit limits checked and if sale exceeds limit, specific authorization needed
b. Aging of accounts receivable
4 a. Perpetual inventory system
b. RFID or bar code technology
c. Physical inventory counts
d. Sales forecast and activity reports
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Shipping Process (1 of 2)
Pick and pack the order
Source documents: picking ticket
Ship the order
Source documents: Packing slip, Bill of lading
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Shipping Process (2 of 2)
Threats
Controls
Picking wrong item or quantity to ship
Theft
Shipping errors (fail to ship the goods, wrong quantities, wrong items, ship to wrong address, duplication)
1 a. Bar code technology
b. Reconcile picking list to sales order
2 a. Restrict physical access to inventory
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
b. Data entry edit controls
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Billing Process (1 of 2)
Invoicing the customer
Source document: sales invoice
Updating accounts receivable
Source document: credit memo and monthly statements
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Billing Process (2 of 2)
Threats
Controls
Failure to bill customer
Billing errors
Posting errors in accounts receivable
Inaccurate or invalid credit memos
1 a. Reconcile invoices with sales orders and shipping documents
b. Separate shipping and billing functions
2 a. Data entry edit controls
b. Configure system for automatically enter price data
c. Data entry edit controls
d. reconciliation of shipping documents to sales orders
3 a. Reconcile subsidiary accounts receivable balance to the amount for accounts receivable in the general ledger
b. Mail monthly statements to customers
4 a. Segregation of authorization and recording function for credit memos
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Cash Collection Process (1 of 2)
Process customer payment and update their account balance
Remittance
Deposit payments to the bank
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Cash Collection Process (2 of 2)
Threats
Control
Theft of cash
Cashflow problems
1 a. Proper segregation of cash handling and posting to customer accounts, authorize credit memos, or reconcile bank account
b. Use lockbox
c. Immediately open mail, prompt
endorsement and deposit all cash
receipts daily
d. Use cash registers
2 a. Lockbox
b. Discounts for early payment
c. Cash flow budgeting
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Key Terms
Revenue cycle
Sales order
Electronic data interchange (EDI)
Credit limit
Accounts receivable aging report
Back order
Picking ticket
Customer relationship management systems (CRM)
Packing slip
Bill of lading
Sales invoice
Open-invoice method
Remittance advice
Balance-forward method
Monthly statement
Cycle billing
Credit memo
Remittance list
Lockbox
Electronic lockbox
Electronic funds transfer (EFT)
Financial electronic data interchange (FEDI)
Universal payment identification code (UPIC)
Cash flow budget
Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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Copyright © 2018 Pearson Education, Inc.
Chapter 12: The Revenue Cycle: Sales to Cash Collections
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