topic 6 section 1

  1. the revenue cycle
    aka revenue process consists of two sub-processes (sales and cash receipts)
  2. 5 key documents and records involved in sales process
    • customer order
    • bill of lading
    • Sales Invoice
    • Sales Transaction Files and A/R Master File
    • Master File (general ledger)
  3. customer order
    starting point for the process is order from a customer, received by the company's sales department
  4. once receive an order the sales department prepares
    a form called a sales order
  5. is the sale is "on account (not a cash or credit-card sale) then the company's
    credit manager (credit department) will evaluate the customer's credit balance and history prior to shipment and either approve or reject the sale
  6. when sales order is approved, then
    • one copy of sales order is sent to the billing department
    • a second copy is sent to the WAREHOUSE (where goods will be prepared for shipping)
    • lastly the goods and copy of the sales order are sent to the SHIPPING department
  7. controls that are in step 1 (customer order)
    • authorization (check credit before sale approved)
    • segregation of duties (different departments)
    • Adequate documents and records (sales orders are pre-numbered)
  8. bill of lading
    it's the "shipping document" which is a contract between the company (seller) and the freight carrier (UPS)
  9. after the goods have been shipped a copy of bill of lading is sent to the
    billing department
  10. internal controls in bill of lading (5 of them)
    • -Authorization (inventory is released from warehouse to shipping department only after an approved sales order is received)
    • -Segregation of duties (custody of assets- merchandise- is segregated from recording of sales transactions (acct dept)
    • -Adequate documents and records (bill of lading is pre-numbered)
    • -Access Controls (access to inventory is limited- warehouse has fence, locks, alarms, guards)
    • -Independent Verification (shipping dept verifies goods sent to them from warehouse match goods ordered on the sales order)
  11. step 3: sales invoice
    "bill" sent to the customer, indicating the amount owed terms of the sale, payment due date, ect.
  12. sales invoice is prepared by
    billing department after receiving a copy of the sales order (from the sales dept) and a copy of bill of lading (shipping dept)
  13. a copy of sales invoice is sent to the
    A/R dept where they sale is recorded in the sales journal
  14. internal controls in sales invoice (step 3)- 2 internal
    • -Adequate documents/records (invoices are pre-numbered)
    • -Independent Verification (before preparing the sales invoice, billing dept verifies the info on the sales matches info on bill of lading
  15. step 4: sales transaction file (sales journal) and A/R Master file (A/R sub ledger)
    in computerized acct sys, sales transactions are entered into the sales transaction file which i used to update data in the A/R Master File
  16. Internal controls in step 4 (sales tran file) - 3
    • -Segregation of Duties (record-keeping function, the A/R separate from G/L)
    • -Access Controls (locks, passwords)
    • -Independent Verification (A/R sub ledger is reconciled with the A/R account in the G/L)
  17. in manual acct systems, sales transactions are recorded by the company's
    A/R dept in the sales journal and are posed to the A/R sub ledger
  18. Step 5: Master File (General Ledger)
    periodically, A/R dept sends totals for daily (weekly) sales transactions to the G/L dept for posting to the A/R and sales accts in the Master file (G/L)
  19. Internal controls for step 5 (master file) - 2
    • -Segregation of Duties (same as step 4)
    • -Access Controls (locks and passwords)
  20. automation vs reengineering
    • -Automation: simple changes of manual tasks (i.e. improve accuracy and speed)
    • -Reengineering: rethinking how the sales process is performed in order to find new and better procedures that improve performance and reduce costs
  21. 3 functions performed manually
    • 1. receiving customer order
    • 2. checking customer credit worthiness
    • 3. warehousing and shipping
  22. 3 functions used by a computer to perform
    • the billing
    • accounts receivable
    • general ledger functions
Card Set
topic 6 section 1
topic 6 section 1- sales process