Chapter 12: The Revenue Cycle: Sales to Cash Collections – Flashcards
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Revenue Cycle
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The recurring set of business activities and data processing operations associated with providing goods and services to customers and collecting cash in payments for those sales
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The 4 Basic Revenue Cycle activities
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1. Sales order entry 2. Shipping 3. Billing 4. Cash collections
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Threats and controls in the Revenue Cycle
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Page 369
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Sales order entry process
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1. Taking the customer's order 2. checking and approving customer credit 3. Checking inventory availability
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Sales order
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The document created during sales order entry listing the item numbers , quantities, prices, and terms of the sale
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Electronic data Interchange (EDI)
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The use of computerized communications and a standard coding scheme to submit business documents electronically in a format that can be automatically processed by the recipients information system
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Credit Limit
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The maximum allowable credit account balance for each customer, based on past credit history and ability to pay.
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Accounts receivable ageing report
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Accounts receivable ageing report
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back order
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A document authorizing the purchase or productivity of items that is crated when there is insufficient inventory to meet customer orders.
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Picking ticket
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A document that lists the items and quantities ordered and authorizing the inventory control function to release that merchandise to the shipping department
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Customer relationship management (CRM) systems
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Software that organizes information about customers in a manner that facilitates efficient and personalized service
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Packing slip
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A document listing the quantity and description of each item included in a shipment
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Bill of lading
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A legal contract that defines responsibility for goods while they are in transit
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Freight bill
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If the customer is to pay the shipping charges, the copy of the bill of lading may serve as a freight bill to indicate the amount the customer should pay to the carrier
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Sales Invoice
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A document notifying customers of the amount of a sale and where to send payment
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Open-invoice method
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Method for maintaining account receivable in which customers typically pay according to each invoice
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Remittance advice
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A copy of the sales invoice returned with a customers payment that indicates the invoices, statements, or other items being paid.
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balance -forward method
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Method of maintaining accounts receivable in which customers typically pay according to the amount shown on a monthly statement, rather than by individual invoices. Remittances are applied against the total account balance, rather than specific invoices.
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Monthly statement
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A document listing all transaction that occurred during the past month and informing customers of their current account balance
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Cycle billing
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Producing monthly statements for subsets of customers at different times
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credit memo
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A document, approved by the credit manager, authorizing the billing department to credit a customer's account
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Remittance list
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A document listing names and amounts of all customer payments received in the mail
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lock box
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A postal address to which customers send their remittances
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electronic lock box
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A lock box arrangement in which the bank electronically send the company information about the customer account number and thte amount remitted as son as it receives payments
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Electronic funds transfer (EFT
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The transfer of funds through use of on-line banking software
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Financial Electronic Data interchange (FEDI)
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The combination of EFT and EDI that enables both remittance data and funds transfer instructions to be included in one electronic package
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Universal payment identification code (UPIC)
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a number that enables customers to remit payments via an ACH credit without requiring the seller to divulge detailed information about its bank account
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Cash flow budget
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A budget that shows projected cash inflows and outflows for a specified period
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Vendor invoices are approved by the __________, which reports to the ___________
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- Accounts Payable Department - controller
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These 3 documents are matched before an account payable is booked
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-purchase order - receiving report - vendor invoice
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The best way to force receiving clerks to count incoming goods
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Provide them with a blind copy of the purchase order (no quantities)
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According to the ACFE 2014 report, ______ occurs most frequently and ______ has the highest median loss
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- Asset Misappropriation - Fraudulent Financial Statements
