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