Chapter 11THE REVENUE CYCLE

Introduction

Revenue cycle:1. Respond to customer

inquiries2. Develop agreements with

customers to provide goods and services in the future

3. Provide services or ship goods to the customer

4. Recognize claim for goods and services provided

5. Collect cash6. Deposit cash in the bank7. Prepare reports

Introduction

Alternative revenue cycle systems:

Alternative ordering methods1. Order before delivery 2. Immediate customer

Alternative payment timing1. Before delivery 2. At time of delivery 3. After delivery

Alternative forms of payment1. Cash2. Check 3. Credit or debit card4. Sales on account

Revenue Cycle: Process and Data

Risks: Execution Recording UpdatingRevenue cycle menu

Revenue Cycle: Process and Data

Controls: Workflow controls Input controls

Drop-down menus Record checking Confirmation of data Referential integrity

controls Format checks to limit

data entered Validation rules to limit

the data entered

Revenue Cycle: Process and Data

Controls: Input controls

Use of defaults Restrictions against

leaving a field blank Establish a field as a

primary key Computer-generated

values Batch control totals

before data entry compared to printouts after data entry

Review of edit report for errors

Exception reports

File Maintenance

Using Customer File Maintenance to Control Risks

Controls over Customer Maintenance:

File maintenance for inventory

File maintenance and performance reviews

Accept Order

On-line orderingSales orders and

services

Pick and Ship Goods

Effect of shipment on database

Bill Customer

Control trade-offs

Collect Cash

Record Collections

Posting the records

Deposit Cash

Reconcile Cash

Controls provided by other periodic comparisons

Comparison of the deposit slip to communications from the bank

Compare an accounts receivable ledger report to the accounts receivable balance in the general ledger

Monthly Activities

Send customer statements

Print accounts receivable aging report

Purge records Open item system Purging Balance forward system Purging and updating

in balance forward systems

Balance Forward Systems for Other Accounting Modules

General ledgerBank statement

Other Types of Revenue Cycles

Cash and carryCredit card sales

K E Y T E R M S

Accounts receivable aging report

Balance forward system

Bill of lading Cash and carry system Cash receipts journal Open item system

K E Y T E R M S

Packing slip Picking ticket Remittance advice Remittance list Sales invoice Sales journal