Chapter
8-1
Revenue and
Cash Collection
Processes and
Controls
Chapter
8-2
Accounting Information Systems, 1st Edition
Study Objectives
1. An overview of revenue processes
2. Sales processes and the risks & controls
3.
Sales return processes and the risks and controls in sales return processes
4. Cash collection processes and the risks & controls
5. An overview of IT systems of revenue and cash collection that enhance the
efficiency of revenue processes
6. E-business systems and the related risks and controls
7. Electronic data interchange (EDI) systems and the related risks and
controls
8. Point of sale (POS) systems and the related risks and controls
9.
Ethical issues related to revenue processes
10.
Corporate governance of revenue processes
Chapter
8-3
Introduction to Revenue Processes
Systems and processes must be in place to capture, record,
summarize, and report sales transactions.
Processes include:
Polices and procedures employees follow in completing
the sale.
Capturing customer data and sales quantities.
Routing sales documents to the right departments.
The Accounting System uses this flow of sales documents to
various departments to record, summarize, and report the
results of the sales transactions.
Chapter
8-4
SO 1 An overview of revenue processes within an organization
Introduction to Revenue Processes
Business processes common in company-to-company
sales are:
1. Collect order data from customer.
2. Deliver goods.
3. Record receivable and bill customer.
4. Handle product returns.
5. Collect the cash.
6. Update records, such as
 accounts receivable,
 inventory,
 cash,
Chapter
8-5
 revenue, and
 cost of goods sold.
SO 1 An overview of revenue processes within an organization
Sales Processes
Terminology
Chapter
8-6
 Purchase Order
 Packing Slip
 Sales Order
 Bill of Lading.
 Price List
 Shipping Log
 Credit Limit
 Sales Invoice (Bill)
 Pick List
 Sales Journal
SO 2 Sales processes and the risks and controls in sales processes
Sales Processes
Exhibit 8-2
Sales Process Map
See next slide for larger image.
Chapter
8-7
SO 2 Sales processes and the risks and controls in sales processes
Sales Processes
Chapter
8-8
Exhibit 8-2
Sales Process Map
SO 2 Sales processes and the risks and controls in sales processes
Sales Processes
Chapter
8-9
Exhibit 8-2
Sales Process Map
SO 2 Sales processes and the risks and controls in sales processes
Controls and Risks in Sales Processes
Common procedures associated with the revenue
process:
 Authorization of transactions
 Segregation of duties
 Adequate records and documents
 Security of assets and documents
 Independent checks and reconciliation
Chapter
8-10
SO 2 Sales processes and the risks and controls in sales processes
Controls and Risks in Sales Processes
Characteristics indicating risk with respect to
revenue processes:
 Frequent changes.
 One or few key customers..
 multiple locations.
Chapter
8-11
SO 2 Sales processes and the risks and controls in sales processes
Cash Collection Processes
Company-to-company sales are typically made on account,
and a time span is given for the customer to pay.
Terminology:
 Remittance advice
 Cash receipts journal
Chapter
8-12
SO 4 Cash collection processes and the risks
and controls in cash collection processes
Cash Collection Processes
Exhibit 8-12
Cash Receipts Process Map
See next slide for larger image.
Chapter
8-13
SO 4 Cash collection processes and the risks
and controls in cash collection processes
Cash Collection Processes
Chapter
8-14
Exhibit 8-12
Cash Receipts Process Map
SO 4 Cash collection processes and the risks
and controls in cash collection processes
Cash Collection Processes
Chapter
8-15
Exhibit 8-12
Cash Receipts Process Map
SO 4 Cash collection processes and the risks
and controls in cash collection processes
Controls and Risks Associated with the Cash
Collection Process
Specific controls over the cash receipts process:
 Authorization of transactions
 Segregation of duties
 Adequate records and documents
 Security of assets and documents
 Independent checks and reconciliation
Chapter
8-16
SO 4 Cash collection processes and the risks
and controls in cash collection processes
IT Enabled Systems of Revenue and Cash
Collection Processes
Sophisticated, highly integrated IT systems
capture, record, and process revenue and cash
collection events.
Such systems include:
 E-commerce systems.
 Electronic Data Interchange (EDI) systems.
 Point of Sale (POS) systems.
Chapter
8-17
SO 5 An overview of IT systems of revenue and cash collection
that enhance the efficiency of revenue processes
E-Business Systems and the Risks and Controls
Two popular types of Internet sales:
Business to Business (B2B)
Business to Consumer (B2C)
Chapter
8-18
SO 6 E-business systems and the related risks and controls
Electronic Data Interchange and the Risks and
Controls
Electronic data interchange is the inter-company,
computer-to-computer transfer of business documents
in a standard business format.
Chapter
8-19
SO 7 Electronic data interchange (EDI) systems
and the related risks and controls
Point of Sale Systems and the Risks and
Controls
Point of Sale systems, features that assist accountants
and managers:
1. Touch screen menus.
2. Bar code scanning.
3. Real-time access to inventory and price data.
4. Credit card authorizations during the sale.
5. Real-time update of cash, sales, and inventory records.
6. Immediate summaries and analyses.
7. Integration with the company’s general ledger system.
Chapter
8-20
SO 8 Point of sale (POS) systems and the related risks and controls
Controls and Risks in Sales Processes
Quick Review
The purpose of tracing shipping documents to
prenumbered sales invoices would be to provide
evidence that
a. shipments to customers were properly invoiced.
b. no duplicate shipments or billings occurred.
c. goods billed to customers were shipped.
d. all prenumbered sales invoices were accounted
for.
Chapter
8-21
SO 2 Sales processes and the risks and controls in sales processes
Controls and Risks in Sales Processes
Quick Review
The purpose of tracing sales invoices to shipping
documents would be to provide evidence that
a. shipments to customers were properly invoiced.
b. no duplicate shipments or billings occurred.
c. goods billed to customers were shipped.
d. all prenumbered sales invoices were accounted
for.
Chapter
8-22
SO 2 Sales processes and the risks and controls in sales processes
Cash Collection Processes
Quick Review
Which of the following is not a document that is
part of the cash collection process?
a. Remittance advice
b. Cash receipts journal
c. Bank deposit slip
d. Packing slip
Chapter
8-23
SO 4 Cash collection processes and the risks
and controls in cash collection processes
Cash Collection Processes
Quick Review
Which of the following would represent proper segregation
of duties?
a. The employee who has custody of cash also does
accounts receivable record keeping.
b. The employee who has custody of cash completes the
bank reconciliation.
c. The employee who opens mail containing checks
prepares a list of checks received.
d. The employee who opens mail containing checks
records transactions in the general ledger.
Chapter
8-24
SO 4 Cash collection processes and the risks
and controls in cash collection processes