Chapter 11
Sales / collection process
When you finish studying this chapter, you should be able to:
1. Explain the elements of Porter’s value chain
2. Explain the role and purpose of the sales / collection process
3. List and discuss, in order, the steps in the process
4. Identify and describe documents commonly used in the process
5. Suggest and evaluate internal controls associated with sales / collection activities
6. Explain how information technology can make the sales / collection process more
effective and efficient
7. Create and interpret flowcharts and data flow diagrams related to sales and collections
I.
Porter’s value chain
ACC 3113 – Accounting Information Systems
Chapter 11 | Page 1
II.
Steps in the sales / collection process
1. Take customer order
2. Approve customer credit
3. Fill the order based on approved credit
4. Ship the product
5. Bill the customer
6. Collect payment
7. Process uncollectible receivables as necessary
Sales/Collection DFD:
ACC 3113 – Accounting Information Systems
Chapter 11 | Page 2
III.
Documents
1. Customer order
a. Summarizes items ordered and prices
b. Originates in sales department
c. Terminates in warehouse
2. Picking list
a. Guides selection of items from warehouse
b. Originates in warehouse
c. Terminates in shipping department
3. Packing list
a. Specifies contents of shipment
b. Originates in shipping department
c. Terminates with customer
4. Bill of lading
a. Specifies freight terms
•
FOB destination or shipping point
•
Freight prepaid or collect
b. Originates in shipping department
c. Terminates with common carrier
5. Customer invoice
a. Bills client
b. Originates in billing department
c. Terminates with customer
ACC 3113 – Accounting Information Systems
Chapter 11 | Page 3
6. Customer check
a. Remits payment
b. Originates with customer
c. Terminates with cash receipts department
7. Remittance advice
a. Provides source document for AIS
b. Originates with customer
c. Terminates with accounting
8. Deposit slip
a. Transmits cash receipts to bank
b. Originates with cash receipts department
c. Terminates with bank
IV.
Internal controls
1. Establishing a formal credit approval process
2. Maintaining adequate inventory
3. Incorporating independent order checking
4. Insuring goods in transit
9. Matching documents prior to billing
10. Separating duties: authorization, custody, recordkeeping
11. Endorsing checks restrictively
12. Reconciling the bank statement
ACC 3113 – Accounting Information Systems
Chapter 11 | Page 4
V.
Information technology
1. Maintain customer lists
2. Generate sequentially-numbered forms
3. Look up inventory status
4. Identify unpaid and past-due invoices
5. Record transactions in the accounting information system
ACC 3113 – Accounting Information Systems
Chapter 11 | Page 5