Chapter 11
THE REVENUE CYCLE
Introduction
Revenue cycle:
1. Respond to customer
inquiries
2. Develop agreements with
customers to provide goods
and services in the future
3. Provide services or ship
goods to the customer
4. Recognize claim for goods
and services provided
5. Collect cash
6. Deposit cash in the bank
7. Prepare reports
Introduction
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Alternative revenue cycle
systems:
Alternative ordering
methods
1. Order before delivery
2. Immediate customer
Alternative payment timing
1. Before delivery
2. At time of delivery
3. After delivery
Alternative forms of
payment
1. Cash
2. Check
3. Credit or debit card
4. Sales on account
Revenue Cycle:
Process and Data
Risks:
 Execution
 Recording
 Updating
Revenue cycle menu
Revenue Cycle:
Process and Data
Controls:
 Workflow controls
 Input controls
 Drop-down menus
 Record checking
 Confirmation of data
 Referential integrity
controls
 Format checks to limit
data entered
 Validation rules to limit
the data entered
Revenue Cycle:
Process and Data
Controls:
 Input controls
 Use of defaults
 Restrictions against
leaving a field blank
 Establish a field as a
primary key
 Computer-generated
values
 Batch control totals before
data entry compared to
printouts after data entry
 Review of edit report for
errors
 Exception reports
File Maintenance
Using Customer File
Maintenance to Control Risks
Controls over Customer
Maintenance:
 File maintenance for
inventory
 File maintenance and
performance reviews
Accept Order
On-line ordering
Sales orders and services
Pick and Ship Goods
Effect of shipment on database
Bill Customer
Control trade-offs
Collect Cash
Record Collections
Posting the records
Deposit Cash
Reconcile Cash
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Controls provided by other
periodic comparisons
Comparison of the deposit
slip to communications
from the bank
Compare an accounts
receivable ledger report to
the accounts receivable
balance in the general
ledger
Monthly Activities
Send customer
statements
 Print accounts receivable
aging report
 Purge records
Open item system
 Purging
Balance forward system
 Purging and updating in
balance forward systems
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Balance Forward
Systems for Other
Accounting Modules
General ledger
Bank statement
Other Types of
Revenue Cycles
Cash and carry
Credit card sales
KEYTERMS
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Accounts receivable
aging report
Balance forward system
Bill of lading
Cash and carry system
Cash receipts journal
Open item system
KEYTERMS
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Packing slip
Picking ticket
Remittance advice
Remittance list
Sales invoice
Sales journal