CH: 12 Revenue Cycle

Question 1

Basic Revenue cycle activities

Answer 1

• Sales order entry
• Shipping
• Billing
• Cash collections

Question 2

Threats to and controls to Revenue cycle

Answer 2

Threats :
-Inaccurate or invalid master data 
-loss or destruction of data 
Controls :
-data processing integrity controls 
-Backup and disaster recovery procedures

Question 3

Sales order entry processing steps

Answer 3

• take customer order source document: “sales order”
• approve customer credit
• check inventory availability
• respond to customers inquiries

Question 4

Sales order entry processing threats and controls

Answer 4

Threats :
-Incomplete /Inaccurate data 
-Invalid orders 
Controls :
-Signature to authorize sale 
-perpetual inventory system

Question 5

Shipping Process

Answer 5

• Pick and pack order source document : “picking ticket”

- Ship the order :”packing slip , bill of lading”

Question 6

Shipping process threats and controls

Answer 6

Threats :
-theft
-shipping errors(fail to ship, wrong quantities or item )
Controls :
-Restrict physical access to inventory 
-Document inventory transfers

Question 7

Billing Process

Answer 7

• invoicing the customer source document : “sales invoice”

- updating A/R source document: “credit memo and monthly statements”

Question 8

Billing Process threats and controls

Answer 8

Threats :
-failure to bill customer 
-billing errors 
Controls :
-data entry edit controls 
-mail monthly statements to customers

Question 9

Cash collection Process

Answer 9

• process customer payment and update their account balance “remittance”
• deposit payment to bank

Question 10

Cash collection Threats and controls

Answer 10

Threats :
-theft of cash 
-cash flow problems 
Controls :
-discount for early payment 
-use of cash registers