Accounting Information Systems

Transcription

1 Accounting Information Systems Fourteenth Edition Chapter 12 The Revenue Cycle: Sales to Cash Collections ALW AYS LEARNING

2 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.

3 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.

4 Basic Revenue Cycle Activities Sales order entry Shipping Billing Cash Collections

5 General Threats and Controls to Revenue Cycle Threats 1. Inaccurate or invalid master data 2. Unauthorized disclosure of sensitive information 3. Loss or destruction of data 4. Poor performance Controls 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

6 Sales Order Entry Processing Steps Take the customer order Source document: sales order Approve customer credit Check inventory availability Respond to customer inquiries

7 Sales Order Entry Processing Threats 1. Incomplete/inaccurate orders 2. Invalid orders 3. Uncollectible accounts 4. Stockouts and excess inventory 5. Loss of customers Controls 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

8 Shipping Process (1 of 2) Pick and pack the order Source documents: picking ticket Ship the order Source documents: Packing slip, Bill of lading

9 Shipping Process (2 of 2) Threats 1. Picking wrong item or quantity to ship 2. Theft 3. Shipping errors (fail to ship the goods, wrong quantities, wrong items, ship to wrong address, duplication) Controls 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

10 Billing Process (1 of 2) Invoicing the customer Source document: sales invoice Updating accounts receivable Source document: credit memo and monthly statements

11 Billing Process (2 of 2) Threats 1. Failure to bill customer 2. Billing errors 3. Posting errors in accounts receivable 4. Inaccurate or invalid credit memos Controls 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

12 Cash Collection Process (1 of 2) Process customer payment and update their account balance Remittance Deposit payments to the bank

13 Cash Collection Process (2 of 2) Threats 1. Theft of cash 2. Cashflow problems Control 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

14 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