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AIS > Chapter 12: Revenue Cycle > Flashcards

Chapter 12: Revenue Cycle Flashcards

1
Q

revenue cycles primary objective

A

to provide the right product in the right place at the right time for the right price.

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2
Q

4 basic revenue cycle activities

A
  1. sales order entry - take order
  2. shipping - process order
  3. billing - invoice
  4. cash collections
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3
Q

Revenue cycle

A

the end-to-end processes necessary to convert service or produce sales into cash.

Give goods/services, get cash

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4
Q

Electronic Data INterchange (EDI)

A

Structured data formats over secure network

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5
Q

Electric Funds Transfer (EFT)

A

Direct transfer between bank accounts. Coupled with lockbox remittance data for financial EDI (FEDI)

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6
Q

General issues throughout revenue cycle

A
  1. inaccurate or invalid master data
  2. unauthorized disclosure of sensitive data
  3. loss or destruction of data
  4. poor performance
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7
Q

Sales Order Entry threats (5)

A
  1. Incomplete/inaccurate orders
  2. Invalid Orders
  3. uncollectible accounts
  4. stock outs or excess inventory
  5. Loss of customer
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8
Q

Incomplete or inaccurate orders

A
  1. data entry edit controls

2. restriction of access to master data

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9
Q

Invalid Orders

A

digital signatures or written signatures

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10
Q

Uncollectible accounts

A
  1. credit limits.
  2. specific authorization to approve sales to new customers or sales that exceed customer’s credit limit
  3. Aging of A/R
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11
Q

Stockouts or excess inventory

A
  1. perpetual inventory control system
  2. use of bar-codes/RFID
  3. Training
  4. periodic physical counts of inventory
  5. sales forecasts and activity reports
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12
Q

Loss of Customers

A

CRM systems, self-help web sites, and proper evaluation of customer service ratings

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13
Q

Who is in charge of credit approvals

A

key control - credit manager/ treasurer.

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14
Q

who can establish credit limits

A

general authorization

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15
Q

who controls past due AR, exceeded limits, and change limits

A

specific authorization

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16
Q

who does the sales department report to

A

vice president of marketing

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17
Q

3 steps of sales order entry

A
  1. sales order entry
  2. credit check
  3. check inventory
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18
Q

steps to shipping

A

pick, pack , ship

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19
Q

2 steps to billing

A

invoicing and AR update

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20
Q

what triggers the pick and pack process

A

the picking ticket generated by the sales order

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21
Q

who creates the packing slip

A

shipping department

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22
Q

who creates bill of lading

A

shipping department

23
Q

packing slip

A

lists the quanitty and description of each item included in the shipment

24
Q

bill of lading

A

a legal contract that defines responsibility for the goods in transit. Id the carrier,s ource, destination, and any special shipping instruction, and who pays the carrier.

25
Q

picking the wrong items or quantity

A

reconciliation of sales order and picking slip.

RFID/ barcodes

26
Q

theft of inventory

A
  1. physical inventory counts
  2. warehouse and shipping department sign off goods.
  3. RFID/ barcodes
  4. Restriction of physical inventory
27
Q

Shipping errors

A
  1. Reconciliation of shipping documents, sales order, picking slip, packing slip.
  2. RFID
  3. data entry controls
28
Q

When is the invoice created

A

during billing

29
Q

Sales Invoice

A

notifies customers of the amount to be paid and where to send payment

30
Q

what does invoice create

A

accounting entry for revenue/AR

31
Q

Who does the Accounts Receivable report to

A

the controller.

32
Q

What does the AR function perform (2 tasks)

A
  1. uses info from on the sales invoice to debit customer accounts
  2. credit those accounts when payments are received.
33
Q

Open Invoice Method

A

customers pay each invoice. Two invoices are sent to the customer and one is returned with payment

34
Q

Balance Forward method

A

customers pay accounting to a monthly statement

35
Q

Remittance advice

A

copy of the invoice which is a turnaround document where customers payments are then applied against specific invoices.

36
Q

Cycle Billing

A

bill 25% of customers each week.

37
Q

Credit Memo

A

authorizes the crediting of the customers account when goods are returned

38
Q

Who approves returns

A

credit manager

39
Q

who is in control of cash handling

A

cashier who reports to the treasurer

40
Q

what does the cashier do

A

handles customer remittances and deposits then in the back

41
Q

remittance list

A

a document identifying the names and amounts of all customer remittances and is sent to the AR

42
Q

lockbox

A

a postal address to which customers send their remittances. the bank picks up the checks from the post office box and deposits them in the companies account.

43
Q

electronic lockbox

A

bank electronically sends the company information about the customer account number and the amount remitted as soon as it receives and scans those checks.

44
Q

Electronic Fund Transfer (EFT)

A

CUSTOMERS SEND THEIR REMITTANCES ELECTRONICALLY TO THE COMPANY’S BANK AND THUS ELIMINATE THE DELAY ASSOCIATED WITH THE TINE THE PAYMENT is in the mail system

45
Q

duties which should be segregated in cash handling cycle

A
  1. handing cash/checks and posting remittances to customer accounts
  2. handling cash/checks and authorizing credit memos
  3. handing cash and reconciling the bank statement.
46
Q

cashflow budget

A

best control procedure to reduce the rusk of unanticipated cash shortfalls which provides estimates of cash inflows and outflows/ it can alert an organization to a pending short term cash shortage.

47
Q

checks should be

A

endorsed immediately.

48
Q

lapping

A

when accounts receivable handles cash handling and record keeping.

49
Q

Failure to bill

A
  1. segregate billing, record, and adjustments
  2. reconcile invoice, sales order, picking tickets, shipping docs
  3. account for pre-numbered docs
50
Q

Billing Errors

A
  1. segregation of billing and shipping
  2. use software to create invoice based on sales order price and quantity shipped
  3. restrict access to pricing data
51
Q

Posting Errors in AR

A
  1. data entry controls
  2. ERP
  3. monthly statements to customers
  4. reconcile AR subsidiary and GL
52
Q

Inaccurate or invalid credit memos

A
  1. segregate to credit manager

2. Application control requires evidence of return or specific authorization

53
Q

Theft of cash

A
  1. segregate cash handling and AR
  2. reconcile bank account to GL (independent person)
  3. eliminate cash handling, EFT, FEDI, lockboxes.
  4. immediately endorse checks
  5. count cash and compare to sales report (independent person)
  6. daily deposits to the bank
54
Q

Cash Flow problems

A
  1. cashflow budget.
  2. followup on past due AR
  3. discounts for prompt payments
  4. EFT, FEDI, lockboxes, credit cards

AIS (14 decks)

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