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Chapter 11 THE REVENUE CYCLE

Chapter 11 THE REVENUE CYCLE. Introduction. Revenue cycle: 1. Respond to customer inquiries 2. 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 cash

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Chapter 11 THE REVENUE CYCLE

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  1. Chapter 11THE REVENUE CYCLE

  2. Introduction Revenue cycle: 1. Respond to customer inquiries 2. 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 cash 6. Deposit cash in the bank 7. Prepare reports

  3. Introduction Alternative revenue cycle systems: • Alternative ordering methods 1. Order before delivery 2. Immediate customer • Alternative payment timing 1. Before delivery 2. At time of delivery 3. After delivery • Alternative forms of payment 1. Cash 2. Check 3. Credit or debit card 4. Sales on account

  4. Revenue Cycle: Process and Data Risks: • Execution • Recording • Updating Revenue cycle menu

  5. 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

  6. 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

  7. File Maintenance Using Customer File Maintenance to Control Risks Controls over Customer Maintenance: • File maintenance for inventory • File maintenance and performance reviews

  8. Accept Order On-line ordering Sales orders and services

  9. Pick and Ship Goods Effect of shipment on database

  10. Bill Customer Control trade-offs

  11. Collect Cash

  12. Record Collections Posting the records

  13. Deposit Cash

  14. 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

  15. 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

  16. Balance Forward Systems for OtherAccounting Modules General ledger Bank statement

  17. Other Types of Revenue Cycles Cash and carry Credit card sales

  18. 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

  19. K E Y T E R M S • Packing slip • Picking ticket • Remittance advice • Remittance list • Sales invoice • Sales journal

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