Revenue Cycle

Question 1

What is the revenue cycle?

Answer 1

It represents the whole process from when a customer expresses interest to purchase a product to when a payment is successfully received from them

Question 2

What are the primary organisational units in the revenue cycle?

Answer 2

Marketing, Sales, Finance

Question 3

What are the 2 major elements in the revenue cycle?

Answer 3

Front End - successfully conduct, record, and monitor sales

Back End (Accounts Receivable Phase) - correctly receive, record, and bank payments

Question 4

What are the 2 competitive advantages that the revenue cycle can provide?

Answer 4

1. Higher product pricing - Superior customer service levels justify higher pricing
2. Greater customer value - More efficient and effective processes lowers the cost leading to higher margins

Question 5

How does technology assist the revenue cycle?

Answer 5

• Makes cash and cash flows more transparent and easier to manage
• Improves the ability to capture and analyse revenue data

Question 6

What is the order of the 9 documents in the cycle?

Answer 6

customer order

order acknowledgement

credit application - the form prepared for a credit-applying that shows the customer’s financial position and the customer’s ability to repay any debts owing

sales order

goods packing slip (prepared by the shipping officer for the customer)

bill of lading (prepared by the carriers of the goods for the customer)

shipping notice

sales invoice

remittance advice - sent to the finance or accounting department to evidence the cash receipts from a customer

customer service log - customer service personnel record customer enquiries or concerns

Question 7

What is remittance advice?

Answer 7

Proof that payment was made (it is NOT proof that the payment was received)

Question 8

To reduce the risk of allowing an order to proceed when goods are not available or rejecting an order when goods are available, it is important to:

a.
maintain accurate and timely perpetual inventory records and periodically conduct physical inventory checks.

b.
maintain accurate and timely perpetual inventory records and constantly conduct physical inventory checks.

c.
maintain accurate and timely periodic inventory records and constantly conduct physical inventory checks.

d.
maintain accurate and timely periodic inventory records and periodically conduct physical inventory checks

Answer 8

a.
maintain accurate and timely perpetual inventory records and periodically conduct physical inventory checks.

Question 9

Who is the packing slip generated by?

Answer 9

The shipping clerk

Question 10

Who is the sales invoice prepared by?

Answer 10

The billing clerk

Question 11

Which of the following statement regarding the receipt of cheques is true?
Question 13Answer

a.
Cheques need not be separated from the remittance advice.

b.
Cheques received should be receipted and deposited by the accounts receivable clerk.

c.
Cheques received should be stamped or endorsed immediately.

d.
Cheques should be receipted and deposited by the accounts payable clerk.

Answer 11

c.
Cheques received should be stamped or endorsed immediately.

Question 12

Which of the following departments is not part of the revenue cycle?

a.
Shipping department.

b.
Sales department.

c.
Accounts payable department.

d.
Billing department.

Answer 12

c. Accounts payable department

Question 13

What is an oligopoly?

Answer 13

When there are few, large competitors (eg telecommunications industry)