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Accounting Information Systems > Topic 5 - Revenue Cycle > Flashcards

Topic 5 - Revenue Cycle Flashcards

0
Q

What are the sales order entry processing steps?

A
  1. Take the customer order (Source document: sales order)
  2. Approve customer credit
  3. Check inventory availability
  4. Respond to customer inquiries
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1
Q

What are the basic revenue cycle activities?

A
  1. Sales order entry
  2. Shipping
  3. Billing
  4. Cash collections
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2
Q

What are the threats in sales order entry processing?

A
  1. Incomplete/inaccurate orders
  2. Invalid orders
  3. Uncollectible accounts
  4. Stockouts and excess inventory
  5. Loss of customers
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3
Q

What are the controls for incomplete/inaccurate orders (sales order entry processing)?

A
  1. Data entry edit controls

2. Restrict access to master data to maintain accuracy

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4
Q

What are the controls for invalid orders (sales order entry processing)?

A
  1. Signature to authorize sale
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5
Q

What are the controls for uncollectible accounts (sales order entry processing)?

A
  1. Credit limits checked and if sale exceeds limit, specific authorization needed
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6
Q

What are the controls for stockouts and excess inventory (sales order entry processing)?

A
  1. Perpetual inventory system
  2. RFID or bar code technology
  3. Physical inventory counts
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7
Q

What are the steps in the shipping process?

A
  1. Pick and pack the order (source document: picking ticket)

2. Ship the order (source documents: packing slip and bill of lading)

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8
Q

What are the threats in the shipping process?

A
  1. Picking the wrong item or quantity to ship
  2. Theft
  3. Fail to ship goods
  4. Ship to wrong address
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9
Q

What are the controls for picking the wrong item or quantity to ship (shipping process)?

A
  1. Bar code technology

2. Reconcile picking list to sales order

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10
Q

What are the controls for theft (shipping process)?

A
  1. Restrict physical access to inventory
  2. Document inventory transfers
  3. Physical counts of inventory and reconcile to quantities recorded
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11
Q

What are the controls for failing to ships the goods (shipping process)?

A
  1. Reconcile shipping documents to sales orders, picking lists, and packing slips
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12
Q

What are the controls for shipping to the wrong address (shipping process)?

A
  1. Data entry edit controls
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13
Q

What are the steps in the billing process?

A
  1. Invoicing the customer (source document: sales invoice)

2. Updating accounts receivable (source document: credit memo and monthly statements)

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14
Q

What are the threats in the billing process?

A
  1. Failure to bill customer
  2. Billing errors
  3. Posting errors in accounts receivable
  4. Inaccurate or invalid credit memos
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15
Q

What are the controls for failure to bill customer (billing process)?

A
  1. Reconcile invoices with sales orders and shipping documents.
  2. Separate shipping and billing functions
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16
Q

What are the controls for billing errors (billing process)?

A
  1. Data entry edit controls

2. Configure system for automatically enter price data

17
Q

What are the controls for posting errors in accounts receivable (billing process)?

A
  1. Reconcile subsidiary accounts receivable balance to the amount for accounts receivable in the general ledger
18
Q

What are the controls for inaccurate or invalid credit memos (billing process)?

A
  1. Segregation of authorization and recording function to credit memos.
19
Q

What are the steps in the cash collection process?

A
  1. Process customer payment and update their account balance (source document: remittance advice)
  2. Deposit payments to the bank
20
Q

What are the threats in the cash collection process?

A
  1. Theft of cash

2. Cashflow problems

21
Q

What are the controls for theft of cash (cash collection process)?

A
  1. Prepare segregation of cash handling and posting to customer accounts, authorize credit memos, or reconcile bank account
  2. Use lockbox
  3. Deposit all cash receipts daily
22
Q

What are the controls for cashflow problems (cash collection process)?

A
  1. Lockbox
  2. Discounts for early payment
  3. Cash flow budgeting
23
Q

What is credit limit?

A

Maximum possible account balance for a customer.

24
Q

What is customer relationship management (CRM) systems?

A

System that contains customer-related data organized in a manner to facilitate customer service, sales, and retention.

25
Q

What is a credit memo?

A

A document used to authorize reducing the balance in a customer account.

26
Q

What is the open-invoice method?

A

Method for maintaining accounts receivable in which customers typically pay according to each invoice.

27
Q

What is the balance forward method?

A

Method of maintaining accounts receivable in which customers typically pay according to the amount shown on a monthly statement, rather than by individual invoices.

28
Q

What is cycle billing?

A

Process of dividing customer account master file into subsets and preparing invoices for one subset at a time.

29
Q

What is financial electronic data interchange (FEDI)?

A

The combination of EFT and EDI that enable both remittance data and funds transfer instructions to be included in one electronic package.

30
Q

What is a lockbox?

A

A postal address to which customers send their remittances.

31
Q

What is a remittance advice?

A

Turnaround document returned by customers with payments.

32
Q

What is a back order?

A

Document used to indicate stockouts exist.

33
Q

What is a picking ticket?

A

Document that authorizes the removal of merchandise from inventory.

34
Q

What is the bill of lading?

A

Document used to establish responsibility for shipping goods via a third party.

35
Q

Which document often accompanies merchandise shipped to a customer?

A

packing slip (specifies what is being shipped).

36
Q

Which method is most likely used when a company offers customers discounts for prompt payment?

A

open-invoice method because it facilitates aging each invoice to verify whether a discount should be granted.

37
Q

What revenue cycle activity can potentially be eliminated by technology?

A

billing (with the use of integrated ERP systems)

38
Q

For good internal control, who should approve credit memos?

A

credit manager

39
Q

For good internal control over customer remittances, the mailroom clerk should separate checks from the remittance advices and send the customer payments to which department?

A

cashier (cashier function has custody of cash accounts).

40
Q

What provides a means to both improve the efficiency of processing customer payments and also enhance control over those payments?

A

lockboxes

Accounting Information Systems (8 decks)

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