Accounting Information Systems Chapter 12

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Revenue cycle

a recurring set of business activities and related information processing operations associated with providing goods and services to customers and collecting cash in payment for those sales.

Revenue cycle primary objective

to provide the right product in the right place at the right time for the right price.

4 Basic Revenue cycle Activities

1. Sales order entry 2. Shipping 3. Billing 4. Cash collections

1st general threat to revenue cycle

inaccurate or invalid master file

2nd general threat to revenue cycle

unauthorized disclosure of senstitive information

3rd general threat to revenue cycle

loss or destruction of master data

Revenue Margin

a metric to evaluate overall performance of revenue cycle activities.

3 steps to sales order entry process

1. taking the customer's order 2. checking and approving customer credit 3. checking inventory availability.

sales order document

an electronic form displayed on a computer monitor screen.

Electronic data interchang (EDI)

the use of computerized communications and a standard coding scheme to submit business documents electronically in a format that can be automatically processed by the recipient's information system.

Basic threat for sales order entry

important data about the order is either missing or inaccurate.

2nd threat for sales order entry

the legtimacy of orders.

credit limit

the maximum allowable account balance that management wises to allow for a customer based on the customer's past credit history and ability to pay.

Accounts receivable aging report

a roport listing customer account balances by length of time outstanding.

back order

a document authorizing te purchase or production of items that is created when there is insufficient inventory to meet customer orders.

picking ticket

document that athorized removal of merchandise from inventory.

3rd threat for sales order entry

uncollectible accounts

4th threat to sales order entry

stockouts or excess inventory

5th threat to sales order entry

loss of customers

Customer relationship management systems (CRM)

a system that contains customer-related data organized in a manner to facilitate custoer service, sales, and retention.

1st threat to shipping

picking the wrong items or the wrong quantity

2nd threat to shipping

theft of inventory

3rd threat to shipping

shipping errors (delay, or failue to ship)

2 steps to shipping

1. picking and packing the order 2. shipping the order

packing slip

list the quantity and description of each item included in the shipment.

bill of lading

document used to establish responsibility for shipping goods via a third party.

1st threat of billing

failure to bill

2nd threat to billing

billing errors

3rd threat to billing

posting errors in accounts receivables

4th threat to billing

inaccurate or invalid credit memos

sales invoice

a document that notifies customers of the amount to be paid and where to send payment.

2 ways to maintain accounts receivables

1. open-invoice method 2. balance-forward method

open-invoice method

method of maintaining customer accounts that generates paments for each individual sales transaction.

remittance advice

a turnaround document returned by the customers with payment.

balance-forward method

method of maintaining accounts receivable in which customers typically pay according to the amount shown on a monthly statement, rather than by individual invoices.

monthly statements

a document summerizing all transactions that occurred during the past month and informing customers of their current account balance.

cycle billing

producing monthly statements for subsets of customers at different times.

credit memo

a document used to authorized reducing the balance in a customer account.

1st threat of cash collections

theft of cash

2nd threat of cash collections

cash flow problems

remittance list

a document listing all checks received by mail.

lockbox

post office box to which customers send payments

electronic funds transfer (EFT)

the transfer of funds between two or more organizations or individuals using computers and other automated technology.

financial electronic data interchange (FEDI)

a system theat integrates EFT and EDI information.

cash flow budget

a budget that shows projected cash inflows and outflows for a specified period so that an organization can anticipate the need for short-term borrowing.

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