AFM 341 Chapter 11 Notes.pdf

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Accounting & Financial Management
AFM 341
Clark Hampton

Chapter 11 Revenue Cycle: 1. Respond to customer inquiries: customer inquiries are handled by a salesperson. Helps in understanding a company's products and selecting them 2. Develop agreements with customers to provide goods/services in future: customer orders for products and contracts between company and customer for future delivery of products. Key employees: order entry clerks + salesperson 3. Provide goods/services to customer: for services = service providers are main workers. For products = warehouse personnel/shippers have active role 4. Recognize claim for goods/services provided: company recognizes its claim by recording receivable/billing the customer 5. Collect cash: cash collected from customer 6. Deposit cash in bank: agents are cashier and bank 7. Prepare reports: examples are list of orders, shipments, cash receipts Alternate Revenue Cycle Systems:  3 characteristics of revenue: 1. Order method 2. Payment timing 3. Form of payment  Alternate Revenue Cycle systems: different order timing, payment timing, various types of payments  Ex: restaurant [order before delivery, after service payment, cash/check/card]  Ex: convenience store [no order, at time of purchase, cash]  Ex: magazine publisher [order subscription, before receipt, check/card] Revenue Cycle: Processes and Data  READ EX:11.2 to understand chap  Sales_Order_Detail Table: o Attributes are - Order#, ISBN, Order_Quantity, Quantity_Shipped, Price  Shipment_Detail Table: o Attributes are - Shipment#, ISBN, Quan_Shipped, Quan_Invoiced  Sales_Invoice_ GL_Detail Table: o Attributes are - Invoice#, GL_Account#, Amount Risks and Controls  More focus on input controls here because important for revenue cycle  Input controls: improves accuracy and validity of data entry o Revenue cycle = data entry is file maintenance of customers/inventory. Recording events like orders, shipments, billing, cash collections  Review of risks: o Execution: unauthorized shipment, shipment being made twice. Failure to collect cash, late collection, wrong amount. o Recording: recording order, shipment, collection that never occurred/recording it twice. Recording wrong product/quantity, improperly recording cash o Update: reducing quantity of inventory when it is sold, increasing the customer's balance due for credit sales, updating GL accounts. Risk = failure to update, duplicate updates, wrong record updated Revenue Cycle Menu  learn in this chap about data that needs to be entered, data records created, way an info processing activity helps support the revenue cycle, and risks and controls  The Revenue Cycle Menu = 1. Maintain 2. Record event 3. Process data 4. Display/print reports i. Documents ii. Agent/resource reference lists iii. Summary/detailed status reports for agents and resources 5. Query 6. Exit File Maintenance  When a new customer added, and a sale is recorded, the journal automatically credits Sale, GL #4000 o The current balance of GL is updated when actual transactions occur. CANNOT BE UPDATED BY FILE MAINTENANCE. o Fields in gray cannot be used for data entry during file maintenance Using Customer File Maintenance to Control Risks  Risk of not collecting cash is reduced by requiring credit sales be made ONLY to customers within their credit limits.  Storing reference data about a customer improves efficiency + accuracy of recording orders/collections o Avoids re-entering customer's address etc during repeat sales Controls over Customer Maintenance  Need adequate controls over customer maintenance process o Hard to control since 1st time entering = nothing to check accuracy against o Ex: incorrect billing address = never collecting amount owed from credit sales  File maintenance for inventory: o Before sale of a new product, it should be added to the Inventory table first. o Cannot do data entry for Quantity_on_Hand or Quantity_Allocated o This is finished goods inventory  File maintenance + Performance reviews: 1. Establish budgets, forecasts, standards 2. Use reports to compare actual results o budgets, forecasts, standards 3. Corrective action to improve performance + revise reference data [budgets/forecasts] in master table  Budget figures are included in master tables  Inventory file maintenance is important for controlling order entry process ACCEPT ORDER [E1]  Send in order, enter into system new customer [Customer], check for inventory [Inventory], update Quan_Allocated  2 copies of sales order  1 for warehouse = picking ticket  1 for shipping dept = packing slip  Sales_Order:  Order#  Date  Employee#  Customer#  Sales_Order_Detail:  Order#  ISBN  Order_quantity  Quantity_shipped  Price  Online Ordering  The business should set up service to host Website on server, merchant account for credit card payment deposit, internet credit card authorization  Classify products into categories + export inventory info into spreadsheet with details about each product sold including PK, description, sales price PICK AND SHIP GOODS [E2, E3]  After sales order, 2 items: picking ticket + packing slip  Picking ticket = warehouse pick goods  Ticket --> authority to retrieve items from the warehouse  Has warehouse location = makes easier for employee to find item  Shipper will only accept goods for shipment accompanied by a picking ticket  Packing slip = shipping department  Reconciles picking ticket + packing skip and updates packing slip for any changes indicated on the picking ticket Prepare bill of lading = describes package, carrier, route   Shipping clerk enters the shipment data into the computer system  Computer records it in Shipment + Shipment_Detail tables and updates Quan_on_hand in Inventory table  Copy of packing slip + bill of landing sent to A/R department  Package + original packing slip sent to carrier  shipper counts goods and if count agrees to picking ticket, weigh pkg + calculate shipping charges  When shipment document opens, Shipment# is computer-generated. Order# taken from picking ticket [not Sales_Order]  Now, shipper prints 2 copie of packing slip:  Includes Shipment# and Quantity_Shipped  1 copy of slip attached to pkg before given to carrier  Shipper signs 2nd copy  Shipper handwrites bill of lading: which includes # of packages, weight, calculated shipping charge  Shipper writes Shipment# on the doc  Carrier signs the doc + takes copy of with the pkgs [with packing slip] for shipment  Copy of signed BOL and pack slip sent to AR as proof of shipment Effect of Shipment on Database  Zeroes in a Quantity_Invoiced fiel
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