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Chapter 12 The Revenue Cycle: Sales to Cash Collections

Chapter 12 The Revenue Cycle: Sales to Cash Collections. The Revenue Cycle: Is a recurring set of business activities and related information processing operations associated with providing goods and services to customers and collecting cash payment for those sales.

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Chapter 12 The Revenue Cycle: Sales to Cash Collections

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  1. Chapter 12The Revenue Cycle: Sales to Cash Collections Dr.Mohamed Mousa

  2. The Revenue Cycle: Is a recurring set of business activities and related information processing operations associated with providing goods and services to customers and collecting cash payment for those sales. • The importance of the Revenue Cycle: • Provides goods and services to customers • Collects cash in payment for those sales • Primary Objective: • Provide the right product • In the right place • At the right time for the right price Dr . Mohamed Mousa

  3. 1- Sales order entry • The revenue cycle 2- Shipping 3- Billing 4- Cash collections Dr . Mohamed Mousa

  4. 1- Sales order entry • Take order • Check and approve credit • Check inventory availability Dr . Mohamed Mousa

  5. Sales Order Threats • Incomplete/inaccurate orders • Invalid orders • Uncollectible accounts • Stockouts or excess inventory • Loss of customers Dr . Mohamed Mousa

  6. The most important Sales Order Entry Controls • Data entry edit controls. • Credit limits • Aging of accounts receivable • Perpetual inventory control system • Periodic physical counts of inventory • Sales forecasts and activity reports Dr . Mohamed Mousa

  7. 2- Shipping • Picking and packing the order • Shipping the order Dr . Mohamed Mousa

  8. Shipping Threats • Picking the wrong items or the wrong quantity • Theft of inventory • Shipping errors . Dr . Mohamed Mousa

  9. The most important Shipping controls • Reconciliation of picking lists to sales order details • Documentation of all inventory transfers. • Periodic physical counts of inventory and reconciliation to recorded quantities. • Reconciliation of shipping documents with sales orders, picking lists, and packing slips. • Data entry edit controls. Dr . Mohamed Mousa

  10. 3- Billing • Invoicing • Updating accounts receivable Dr . Mohamed Mousa

  11. Billing Threats • Failure to bill • Billing errors • Posting errors in accounts receivable • Inaccurate or invalid credit memos Dr . Mohamed Mousa

  12. The most important Billing Controls • Separation of billing and shipping functions • Periodic reconciliation of invoices with sales orders, picking tickets, and shipping documents. • Restriction of access to pricing master data • Data entry edit controls • Reconciliation of batch totals • Mailing of monthly statements to customers • Reconciliation of subsidiary accounts to general ledger Dr . Mohamed Mousa

  13. Cash Collections Threats • Theft of cash • Cash flow problems Dr . Mohamed Mousa

  14. Cash Collection Controls • Cash flow budgets • Discounts for prompt payment by customers • Daily deposit of all cash receipts • Prompt, restrictive endorsement of all customer checks • Regular reconciliation of bank account with recorded amounts by someone independent of cash collections procedures • Separation of cash handling function from accounts receivable and credit functions Dr . Mohamed Mousa

  15. The revenue cycle (Credit sales): Dr . Mohamed Mousa

  16. The revenue cycle (Cash sales): Dr . Mohamed Mousa

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