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Chapter 1

Chapter 1. The Billing/Accounts Receivable/Cash Receipts (B/AR/CR) Process. Introduction to Accounting Information Systems. Learning Objectives. Understand relationship between B/AR/CR and its environment

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Chapter 1

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  1. Chapter 1 The Billing/Accounts Receivable/Cash Receipts (B/AR/CR) Process Introduction to Accounting Information Systems

  2. Learning Objectives • Understand relationship between B/AR/CR and its environment • Understand relationship between B/AR/CR and management problem solving • Be familiar with technology re B/AR/CR • Understand logical & physical characteristics • Understand ERP impact on B/AR/CR • Know some operation system and information system control goals and plans

  3. Horizontal Information Flows • Shipping informs A/R (billing) of shipment (via customer acknowledged DOs) • A/R sends invoice to customer • A/R informs GL that invoice sent to customer • Customer may default, sending message to credit control dept of non-payment • Credit control recommends w/off and informs A/R • Credit control changes CR limit; informs sales dept. to terminate sales to customer Cont..

  4. Horizontal Information Flows (2) • A/R informs GL of write-off • Customer makes payment on account • Cashier informs A/R of payment • Cashier informs GL of payment

  5. Technologies for Enhancement • Customer self-service systems • ATMs • “Pay-at-the-pump” for petrol purchases • “Touch & Go” • Customer query system • Digital image documents • Customer contracts • Sales invoices • Speedier cash collection • EFT • Lockbox and electronic lockbox • Credit cards • Debit cards

  6. B/AR/CR Context Diagram

  7. B/AR/CR Level 0 DFD

  8. B/AR/CR Level 1 DFD(Billing or Invoicing) • Compare DO to SO to check for discrepancies. • Prepare and record sales invoices and update AR file, send invoice to customer. Also inform GL to update sales. • Post-billing system vs. pre-billing system

  9. B/AR/CR Level 2 DFD(Managing Customer Accounts) • Validate sales returns and prepare credit notes • Prepare monthly statements of outstanding balances to customers • Write off bad debts and update AR file

  10. B/AR/CR Level 3 DFD(Process cash and cheque remittances) • Compare cheque and remittance advice (turnaround document) • Endorse cheque • Deposit cheques to bank • Update AR file with remittance advice data, and inform GL to update AR

  11. Data Descriptions in B/AR/CR • A/R master data • balance only - current balance, past due, fin. chgs. • balance-forward - above fields + details of current charges; aging of past-due balances • open-item - details of open invoices (invoices not paid); customer can pay by invoice. • Sales event data • one or more invoice records (details contained in invoice data) Cont...

  12. Data Descriptions in B/AR/CR (2) • Invoice data - copies of invoice documents • A/R adjustments data • write-offs, estimated doubtful a/c, sales returns, etc. • Journal voucher #, trans. code, authorization • Cash receipts data • details of customer payments • Remittance advice data - copies of RAs

  13. E-R diagram for B/AR/CR

  14. Controls Plans • Immediate endorsement of cheques • Use turnaround documents • Use of batch totals • Bank reconciliation • Segregation of duties, e.g., cashier and AR personnel

  15. Summary • Main activities in B/AR/CR process • Use technologies in B/AR/CR process to improve efficiency and aid management problem solving • DFD and flowcharting of B/AR/CR process • Operation system and information system control goals and plans

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