Question 1

Revenue Cycle

Accepted Answer

recurring set of business activities and data processing operations associated with revenue; selling goods and services and collecting a payment

Question 2

Steps in Revenue Cycle

Accepted Answer

Sales Order Entry Shipping Billing Cash Collections

Question 3

Steps in Sales Order Entry

Accepted Answer

Take customer order Approve customer credit  Check inventory availability  Respond to customer inquiries

Question 4

What is the source document created during the sale order entry order process?

Accepted Answer

sales/customer order

Question 5

What does the \"sales/customer order\" include?

Accepted Answer

Quantities  Inventory Numbers  Quantity Prices  Terms of Sale  Total Balance

Question 6

Credit Limit

Accepted Answer

Max allowable credit account balance for each customer  Based on past credit history and ability to pay

Question 7

Accounts Receivable Aging

Accepted Answer

report that list customer account balances by length of time outstanding

Question 8

Potential Threats to Sales Order Entry Process

Accepted Answer

Incomplete/Inaccurate Orders: send orders wrong   Invalid Orders: order for item that is not carried; order is approved when there is not enough credit   Uncollectible Accounts: selling to a customer we cannot collect from   Stockouts and Excess Inventory: do not have enough of a popular product or have to much of the wrong product   Loss of Customers: don\'t have customers to sell t

Question 9

Control for incomplete/inaccurate orders:

Accepted Answer

Data Entry Edit Controls: text field (filter/non filter) can only entry certain list of items; ex: system tells you that what you entered/typed is invalid  Restrict Access to Master Data: to eliminate the chance that the master file will be corrupted by a entry level employee

Question 10

Control for invalid orders:

Accepted Answer

Require signature to authorize a sale

Question 11

Control for uncollectible accounts:

Accepted Answer

Check credit limits and required special authorization if credit limit is exceeded

Question 12

Control for stockouts and excess inventory:

Accepted Answer

Use perpetual inventory system (ORT)   Using barcode technology   Physical Inventory Counts

Question 13

Control for loss of customers:

Accepted Answer

none

Question 14

Steps in the Shipping Process

Accepted Answer

Pick and pack the order (source document: picking ticket)   Ship the Order (source documents: packing slip, billing of lading)

Question 15

Picking Ticket/List

Accepted Answer

source document that list items and quantities ordered and authorized inventory control function to release the products to the shipping department

Question 16

Packing Slip

Accepted Answer

a source document that list items and quantities of each item included in a shipment

Question 17

Bill of Lading

Accepted Answer

a legal contract that defines responsibility for goods while in transit

Question 18

FOB Destination

Accepted Answer

transfer rights to customer at destination

Question 19

Shipping Point

Accepted Answer

transfer rights to customer when it is shipped

Question 20

Potential Threats to Shipping Process:

Accepted Answer

Pick the Wrong Item or Quantity: wrong item is sent or the wrong amount even though it was entered correctly   Theft: someone stole the inventory   Failure to Ship Goods: never shipped or shipped late   Shipping to the Wrong Address: mixed up billing address and shipping address

Question 21

Controls for Picking the Wrong Item or Quantity:

Accepted Answer

Barcode Technology  Reconcile the Picking Ticket/List to the Sales/Customer Order

Question 22

Controls for Theft:

Accepted Answer

Restrict physical access to inventory  Document all inventory transfers   Physical counts of inventory

Question 23

Control Failure to Ship Goods:

Accepted Answer

Reconcile Sales/Customer Order, Picking Ticket/List and Packing Slip

Question 24

Control Shipping to the Wrong Address:

Accepted Answer

Data Entry Controls: helps identify a non existent address

Question 25

Steps in Billing Process:

Accepted Answer

Invoicing the Customer (source document: sales invoice)   Update Accounts Receivable (source document: credit memo and monthly statement)

Question 26

Sales Invoice

Accepted Answer

a source document notifying customers of sale and where to send payment

Question 27

Monthly Statement

Accepted Answer

a source document listing all transactions/sales that have occurred during the past month informing the customer of their total account balance

Question 28

Credit Memo

Accepted Answer

a source document approved by the credit manager that authorizes the billing department to credit a customers account thus reducing the amount owed

Question 29

Remittance Advice

Accepted Answer

copy of the sales invoice that is returned along with a customer payment

Question 30

Two Methods to Maintain Accounts Receivable:

Accepted Answer

Open-Invoice Method: customers pay each invoice   Balance-Forward Method: customers pay systemically with statement

Question 31

Potential Threats to Billing Process:

Accepted Answer

Failure to Bill the Customer  Billing Errors  Posting Errors to A/R  Inaccurate and Invalid credit memos

Question 32

Control for Failure to Bill Customers:

Accepted Answer

Reconcile invoices with sales and shipping documents   Separate shipping and billing functions

Question 33

Controls for Billing Errors:

Accepted Answer

Data Entry Edit Controls   Configure system for automatic entry of price data

Question 34

Control for Posting Errors to A/R:

Accepted Answer

Reconcile subsidiary A/R balance to General Ledger

Question 35

Control Inaccurate and Invalid Credit Memos:

Accepted Answer

Segregation of authorization and recording

Question 36

Steps in Cash Collections Process:

Accepted Answer

Process the payment for the customer and update the account balance (source document: remittance list)   Deposit payments at the bank

Question 37

Remittance List

Accepted Answer

a source document that list names and amounts for all payments received

Question 38

Lockbox

Accepted Answer

postal address specifically set up for payments/remittances

Question 39

Electronic Funds Transfer (EFT)

Accepted Answer

transfer of money through online banking

Question 40

Potential Threats to Cash Collection Process:

Accepted Answer

Theft of Cash  Problems with Cash Flow

Question 41

Controls for Theft of Cash:

Accepted Answer

Segregation of duties ex: separating the cash handling and posting to customer accounts, authorize credit memos, or reconcile bank account   Use a lockbox   Deposit cash/payments daily

Question 42

Control Problems with Cash Flows:

Accepted Answer

Use a lockbox   Deposit for early payment   Cash flow budgeting

AIS Chapter 12 The Revenue Cycle: Sales Cycle Information System – Flashcards

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