BU486 Chapter Notes - Chapter 12: Management System, Remittance, Source Document
Chapter 12 – Revenue Cycle: Sales to Cash Collections
Basic Revenue Cycle Activities
• Sales order entry
• Shipping
• Billing
• Cash collections
General Threats and Controls to Revenue Cycle
• Threats
o 1.) inaccurate or invalid master data
o 2.) unauthorized disclosure of sensitive information
o 3.) loss or destruction of data
o 4.) poor performance
• Controls
o 1.) data processing integrity controls, restrict access to master data, review of all
changes to master data
o 2.) access controls, encryption, tokenization of customer personal information
o 3.) backup and disaster recovery procedures
o 4.) managerial reports
Sales Order Entry Processing Steps
• Take the customer order
• Approve customer credit
• Check inventory availability
• Respond to customer inquiries
General Threats and Controls to Sales Order Entry Processing
• Threats
o 1.) Incomplete/inaccurate orders
o 2.) invalid orders
o 3.) uncollectible accounts
o 4.) Stockouts and excess inventory
o 5.) loss of customers
• Controls
o 1.) data entry edit controls, restrict access to master data to maintain accuracy
o 2.) signature to authorize sale
o 3.) credit limits checked and if sale exceeds limit, specific authorization needed, aging of
accounts receivable
o 4.) perpetual inventory system, RFID or bar code technology, physical inventory counts,
sales forecast and activity reports
Shipping Process
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Document Summary
Chapter 12 revenue cycle: sales to cash collections. Basic revenue cycle activities: sales order entry, shipping, billing, cash collections. Sales order entry processing steps: take the customer order, approve customer credit, check inventory availability, respond to customer inquiries. General threats and controls to sales order entry processing: threats, 1. ) Incomplete/inaccurate orders: 2. ) invalid orders, 3. ) uncollectible accounts, 4. ) Shipping process: pick and pack the order, source documents: picking ticket, ship the order, source documents: packing slip, bill of landing. General threats and control of shipping process: threats, 1. ) picking wrong item or quantity to ship, 2. ) theft, 3. ) Shipping errors (fail to ship the goods, wrong quantities, wrong items, ship to wrong address, duplication: controls, 1. ) Invoicing the customer: source document: sales invoice, updating accounts receivable, source document: credit memo and monthly statements. General threats and controls for billing process: threats, 1. Cash collection process: process customer payment and update their account balance, remittance, deposit payment to the bank.
