Accounting Information Systems, 6th edition
James A. Hall
COPYRIGHT © 2009 South-Western, a division of Cengage Learning. Cengage Learning and South-Western
are trademarks used herein under license
Objectives for Chapter 4
y Tasks performed in the revenue cycle, regardless of the
technology used
y Functional departments in the revenue cycle and the flow
of revenue transactions through the organization
y Documents, journals, and accounts needed for audit
trails, records, decision making, and financial reporting
y Risks associated with the revenue cycle and the controls
that reduce these risks
y The operational and control implications of technology
used to automate and reengineer the revenue cycle
The Conceptual System
Overview of Revenue Cycle Activities
y Three process in revenue cycle for most retail,
wholesale & manufacturing organizations:
y Sales order procedure
y Sales return procedure
y Cash receipt procedure
Sales Order
1
Credit / Customer
Service
2
REVENUE CYCLE
(SUBSYSTEM)
Cash Receipts/
Collections
6
Shipping
3
Billing/ Accounts
Receivable
4/5
Revenue Cycle Databases
y Master files
y customer master file
y accounts receivable master file
y merchandise inventory master file
y Transaction and Open Document Files
y sales order transaction file
y
open sales order transaction file
y sales invoice transaction file
y cash receipts transaction file
• Other Files
– shipping and price data reference file
– credit reference file (may not be needed)
– salesperson file (may be a master file)
– Sales history file
– cash receipts history file
– accounts receivable reports file
DFD of Sales Order Process
Journal Vouchers/Entries
How do we get them? y Billing Department prepares a journal voucher:
Accounts Receivable
Sales
DR
CR
y Inventory Control Dept. prepares a journal voucher:
Cost of Goods Sold
Inventory
DR
CR
y Cash Receipts prepares a journal voucher:
Cash
DR
Accounts Receivable
CR
Sales Order Process Flowchart
Sales Order Process Flowchart
Manual Sales Order Processing
y Begins with a customer placing an order
y The sales department captures the essential details on a sales order form.
y The transaction is authorized by obtaining credit approval by the credit department.
y Sales information is released to:
y Billing
y Warehouse (stock release or picking ticket)
y Shipping (packing slip and shipping notice)
Manual Sales Order Processing
y The merchandise is picked from the Warehouse and sent to Shipping. y Stock records are adjusted.
y The merchandise, packing slip, and bill of lading are prepared by Shipping and sent to the customer.
y Shipping reconciles the merchandise received from the Warehouse with the sales information on the packing slip.
y Shipping information is sent to Billing. Billing compiles and reconciles the relevant facts and issues an invoice to the customer and updates the sales journal. Information is transferred to:
y Accounts Receivable (A/R)
y Inventory Control
Manual Sales Order Processing
y A/R records the information in the customer’s account in the accounts receivable subsidiary ledger.
y Inventory Control adjusts the inventory subsidiary ledger.
y Billing, A/R, and Inventory Control submits summary information to the General Ledger dept., which then reconciles this data and posts to the control accounts in the G/L.
Sales Returns Procedures
y The company shipped the customer the wrong merchandise.
y The goods were defective.
y The product was damage in shipment.
y The buyer refused delivery because the seller shipped the goods too late or they were delayed in transit.
DFD of Sales Returns
Sales Returns Flowchart
Sales Return Journal Entry
G/L posts the following to control accounts:
Inventory—Control Sales Returns and Allowances Cost of Goods Sold Accounts Receivable—Control DR
DR
CR
CR
DFD of Cash Receipts Processes
Cash Receipts Flowchart
Manual Cash Receipts Processes
y Customer checks and remittance advices are received in the Mail Room. A mail room clerk prepares a cash prelist and sends the prelist and the checks to Cash Receipts. y The cash prelist is also sent to A/R and the Controller.
y
y Cash Receipts: verifies the accuracy and completeness of the checks
y updates the cash receipts journal
y prepares a deposit slip
y prepares a journal voucher to send to G/L y
Manual Cash Receipts Processes
y A/R posts from the remittance advices to the accounts receivable subsidiary ledger. y Periodically, a summary of the postings is sent to G/L.
y G/L department:
y reconciles the journal voucher from Cash Receipts with the summaries from A/R y updates the general ledger control accounts
y The Controller reconciles the bank accounts.
Summary of Internal Controls
Authorization Controls
y Proper authorization of transactions (documentation) should occur so that only valid transactions get processed.
y Within the revenue cycle, authorization should take place when:
a sale is made on credit (authorization)
y a cash refund is requested (authorization)
y posting a cash payment received to a customer’s account (cash pre‐list) y
Segregation of Functions
Three Rules
1.
2.
3.
Transaction authorization should be separate from transaction processing.
Asset custody should be separate from asset record‐
keeping.
The organization should be so structured that the perpetration of a fraud requires collusion between two or more individuals.
Segregation of Functions
y Sales Order Processing
y credit authorization separate from SO processing
y inventory control separate from warehouse
y accounts receivable sub‐ledger separate from general ledger control account
y Cash Receipts Processing
y cash receipts separate from accounting records
y accounts receivable sub‐ledger separate from general ledger
Supervision
y Often used when unable to enact appropriate segregation of duties. y Supervision of employees serves as a deterrent to dishonest acts and is particularly important in the mailroom. Accounting Records
y With a properly maintained audit trail, it is possible to track transactions through the systems and to find where and when errors were made: y
y
y
y
y
pre‐numbered source documents
special journals
subsidiary ledgers
general ledger
files
Access Controls
y Access to assets and information (accounting records) should be limited.
y Within the revenue cycle, the assets to protect are cash and inventories and access to records such as the accounts receivable subsidiary ledger and cash journal
should be restricted.
Independent Verification
y Physical procedures as well as record‐keeping should be independently reviewed at various points in the system to check for accuracy and completeness:
shipping verifies the goods sent from the warehouse are correct in type and quantity
y warehouse reconciles the stock release document (picking slip) and packing slip y billing reconciles the shipping notice with the sales invoice
y general ledger reconciles journal vouchers from billing, inventory control, cash receipts, and accounts receivable
y
Automating the Revenue Cycle
y Authorizations and data access can be performed through computer screens. y There is a decrease in the amount of paper.
y The manual journals and ledgers are changed to disk or tape transaction and master files. y Input is still typically from a hard copy document and goes through one or more computerized processes. y Processes store data in electronic files (the tape or disk) or prepare data in the form of a hardcopy report. Automating the Revenue Cycle
y Revenue cycle programs can include: y formatted screens for collecting data y edit checks on the data entered y instructions for processing and storing the data
y security procedures (passwords or user IDs) y steps for generating and displaying output y To understand files, you must consider the record design and layout. y The documents and the files used as input sources must contain the data necessary to generate the output reports.
Computer‐Based Accounting Systems
y CBAS technology can be viewed as a continuum with two extremes:
y automation ‐ use technology to improve efficiency and effectiveness y reengineering – use technology to restructure business processes and firm organization
Example: Automated Batch Sales
Reengineering Sales Order Processing Using Real‐Time Technology
y Manual procedures and physical documents are replaced by interactive computer terminals.
y Real time input and output occurs, with some master files still being updated using batches.
y Real‐time ‐ entry of customer order, printout of stock release, packing slip and bill of lading; update of credit file, inventory file, and open sales orders file
y Batch ‐ printout of invoice, update of closed sales order (journal), accounts receivable and general ledger control account
Real‐time Sales Order
Advantages of Real‐Time Processing
y Shortens the cash cycle of the firm by reducing the time between the order date and billing date y Better inventory management which can lead to a competitive advantage
y Fewer clerical errors, reducing incorrect items being shipped and bill discrepancies
y Reduces the amount of expensive paper documents and their storage costs
Reengineered Cash Receipts
y The mail room is a frequent target for reengineering. y Companies send their customers preprinted envelopes and remittance advices. y Upon receipt, these envelopes are scanned to provides a control procedure against theft.
y Machines are open the envelopes, scan remittance advices and checks, and separate the checks.
y Artificial intelligence may be used to read handwriting, such as remittance amounts and signatures.
Automated Cash Receipts
Point‐of‐Sale Systems
y Point of sale systems are used extensively in retail establishments. y Customers pick the inventory from the shelves and take them to a
cashier.
Daily Procedure
y The clerk scans the universal product code (UPC). The POS system is connected to an inventory file, where the price and description are retrieved. y The inventory levels are updated and reorder needs can immediately be detected. Point‐of‐Sale Systems
y The system computes the amount due. Payment is either cash, check, ATM or credit card in most cases.
y
No accounts receivables
y If checks, ATM or credit cards are used, an on‐
line link to receive approval is necessary. Point‐of‐Sale Systems
End‐of‐day Procedure
y At the end of the day or a cashier’s shift, the money and receipts in the drawer are reconciled to the internal cash register tape or a printout from the computer’s database.
y Cash over and under must be recorded y Journal voucher posted to GL account:
Cash
DR
Cash Over/Short
DR
A/R (credit card)
DR
COGS
DR
Sales
Inventory
CR
CR
Computerized POS
Reengineering Using EDI
y EDI helps to expedite transactions.
y The customer’s computer: determines that inventory is needed
y selects a supplier with whom the business has a formal business agreement
y dials the supplier’s computer and places the order y
y The exchange is completely automated.
y
No human intervention or management
EDI System
Company B
Company A
Application
Software
Purchases
System
Sales Order
System
EDI
Translation
Software
EDI
Translation
Software
Direct Connection
Communications
Software
Communications
Software
Other
Mailbox
Company
A’s mailbox
VAN
Other
Mailbox
Company
B’s mailbox
Application
Software
Reengineering Using the Internet
y Typically, no formal business agreements exist as they do in EDI.
y Most orders are made with credit cards.
y Mainly done with e‐mail systems, and thus a turnaround time is necessary y Intelligent agents are needed to eliminate this time lag.
y Security and control over data is a concern with Internet transactions.
CBAS Control Considerations
y Authorization ‐ in real‐time systems, authorizations are automated
y Programmed decision rules must be closely monitored.
y Segregation of Functions ‐ consolidation of tasks by the computer is common
y Protect the computer programs
y Coding, processing, and maintenance should be separated. CBAS Control Considerations
y Supervision ‐ in POS systems, the cash register’s internal tape or database is an added form of supervision
y Access Control ‐ magnetic records are vulnerable to both authorized and unauthorized exposure and should be protected
y Must have limited file accessibility
y Must safeguard and monitor computer programs CBAS Control Considerations
y Accounting Records ‐ rest on reliability and security of stored digitalized data
Accountants should be skeptical about the accuracy of hard‐copy printouts.
y Backups ‐ the system needs to ensure that backups of all files are continuously kept
y
y Independent Verification – consolidating accounting tasks under one computer program can remove traditional independent verification controls. To counter this problem:
y
y
perform batch control balancing after each run produce management reports and summaries for end users to review
PC‐Based Accounting Systems
y Used by small firms and some large decentralized firms
y Allow one or few individuals to perform entire accounting function
y Most systems are divided into modules controlled by a menu‐driven program:
y general ledger
y inventory control
y payroll
y cash disbursements
y purchases and accounts payable
y cash receipts
y sales order
PC Control Issues
y Segregation of Duties ‐ tend to be inadequate and should be compensated for with increased supervision, detailed management reports, and frequent independent verification
y Access Control ‐ access controls to the data stored on the computer tends to be weak; methods such as encryption and disk locking devices should be used
y Accounting Records ‐ computer disk failures cause data losses; external backup methods need to be implemented to allow data recovery
Internal Control
Risk Exposures in the Revenue Cycle - I
Risk
Exposure
1) Credit sales made to customers
who represent poor credit risks
1) Losses from bad debts
2) Unrecorded or unbilled shipments
2) Losses of revenue; overstatement
of inventory and understatement of
accounts receivable in the balance
sheet
3) Alienation of customers and
possible loss of future sales; losses of
revenue
3) Errors in preparing sales invoices
Figure 12-22
Risk Exposures in the Revenue Cycle ‐ II
Risk
Exposure
4) Misplacement of orders from
customers or unfilled backorders
4) Losses of revenue and alienation of
customers
5) Incorrect posting of sales to
accounts receivable records
5) Incorrect balances in accounts
receivable and general ledger account
records
6) Overstatement of revenue in one
year (year of premature booking) and
understatement of revenue in the next
6) Posting of revenues to wrong
accounting periods, such as
premature booking of revenues
Figure 12-22 (continued)
Risk Exposures in the Revenue Cycle ‐ III
Risk
Exposure
7) Fictitious credit sales to nonexistent Overstatement of revenues and
customers
accounts receivable
8) Excessive sales returns and
allowances with certain of the credit
memos being for fictitious returns
9) Theft or misplacement of finished
goods in the warehouse or on the
shipping dock
Figure 12-22 (continued)
8) Losses in net revenue, with the
proceeds from subsequent payments
by affected customers being
fraudulently pocketed
9) Losses in revenue; overstatement of
inventory on the balance sheet
Risk Exposures in the Revenue Cycle ‐ IV
Risk
Exposure
10) Fraudulent write-offs of customers’ 10) Understatement of accounts
accounts by unauthorized persons
receivable; losses of cash receipts
when subsequent collections on
written-off accounts are
misappropriated by perpetrators of the
fraud
11) Theft (skimming) of cash receipts, 11) Losses of cash receipts;
especially currency, by persons
overstatement of accounts receivable
involved in the processing; often
in the subsidiary ledger and the
accompanied by omitted postings to
balance sheet
affected customers’ accounts
12) Lapping of payments from
12) Losses of cash receipts; incorrect
customers when amounts are posted account balances for those customers
to accounts receivable records
whose records are involved in the
lapping
Figure 12-22 (continued)
Risk Exposures in the Revenue Cycle ‐ V
Risk
Exposure
13) Accessing of accounts receivable,
merchandise inventory, and other
records by unauthorized persons
14) Involvement of cash, merchandise
inventory, and accounts receivable
records in natural or human-made
disasters
15) Planting of virus by disgruntled
employee to destroy data on magnetic
media
13) Loss of security over such records,
with possibly detrimental use made of
the data accessed
14) Losses of or damages to assets
Figure 12-22 (continued)
15) Loss of customer accounts
receivable data needed to monitor
collection of amounts from previous
sales
Risk Exposures in the Revenue Cycle ‐ VI
Risk
Exposure
16) Interception of data transmittal
between customers and the web site
16) Loss of data which may be used to
the detriment of customers
17) Unauthorized viewing and
alteration of other customer account
data via the Web
18) Denial by a customer that an
online order was placed after the
transaction is processed
17) Loss of security over customer
records resulting in misstatement of
accounts receivable balances
18) Loss of sales revenues
Figure 12-22 (continued)
Risk Exposures in the Revenue Cycle ‐ VII
Risk
Exposure
19) Use of stolen credit cards to place 19) Loss of shipped goods for which
orders via the Web
payments will not be received
20) Breakdown of the web server due
to unexpectedly high volume of
transactions
Figure 12-22 (continued)
20) Loss of sales revenues and
alienation of customers
Typical Control Objectives for the Revenue Cycle
y Semua customer yang diterima untuk credit sales adalah credit‐
worthy
y Semua barang yang dipesan dikirim dan semua jasa
dilaksanakan sesuai dengan tanggal yang disetujui oleh semua
pihak.
y Semua barang yang dikirim diotorisasi dan ditagih All shipped goods are authorized dan ditagih sesuai dengan periode
akuntansi yang tepat. y Semua sales returns and allowances diotorisasi dan dicatat
dengan teliti dan berdasarkan actual return of goods
y Semua cash receipts dicatat dengan lengkap dan akurat. y Semua credit sales dan transaksi cash receipts transactions diposting ke customers’ accounts yang tepat pada accounts receivable ledger
y Semua accounting records, merchandise inventory,
and cash dilindungi. General Controls of the Revenue Cycle ‐ I
y Organizational Controls
y Unit‐unit dengan fungsi kustodian harus dijaga agar terpisah satu sama lain.
y Fungsi kustodian harus dipisah dari fungsi record‐
keeping. y Untuk sistem yang dikomputerisasi, pengembangan
sistem harus dijaga agar terpisah dari operasi‐operasi
sistem.
General Controls of the Revenue Cycle ‐ II
y Documentation Controls
y Dokumentasi yang lengkap dan up‐to‐date harus tersedia
termasuk didalamnya adalah salinan dokumen, flowcharts, record lay‐outs, dan laporan.
y Program untuk edit dan proses sales dan cash receipt harus diorganisasikan ke buku atau paket terpisah yang ditujukan ke masing‐masing programer, komputer
operator, dan system user.
y Kebijakan manajemen yang berhubungan dengan credit approvals, account write‐off, dsb harus dalam bentuk
tertulis.
General Controls of the Revenue Cycle ‐ II
y Asset Accountability Controls
y A/R subsidiary ledger (master file) harus sering direkonsiliasi
dengan A/R control account di GL.
y Merchandise inventory record harus dijaga pada ledger dan
direkonsiliasi secara periodik ke merchandise inventory control account y Bank reconciliation, harus dibandingkan balance pada bank account dengan cash account balance di GL.
y Petugas bagian pengiriman yang menyetujui penerimaan
order dan pengambilan barang dari gudang dengan
menandatangani stock request atau shipping order.
y Mail room clerk yang menyiapkan daftar semua receive remittances.
y Customer yang mereview monthly statement dari sales dan
payments untuk jumlah‐jumlah yang salah.
General Controls of the Revenue Cycle ‐ II
y Management Practice Controls
Kebijakan manajemen yang berhubungan dengan revenue cycle yang harus ditetapkan dan diikuti adalah sbb: ƒ Pegawai (programer dan akuntan harus dilatih dengan
hati‐hati), pegawai yang menangani kas harus diikat
dengan surat perjanjian.
ƒ Perubahan dan pengembangan sistem harus melalui
prosedur yang jelas yang melibatkan prior approvals, testing, dan sign‐offs.
ƒ Audit terhadap prosedur dan kebijakan sales dan cash receipt harus dilakukan.
ƒ Manajer harus melakukan review periodic analyses, control summaries, dan laporan‐laporan tentang aktivitas
account dan computer‐approved transactions.
General Controls of the Revenue Cycle ‐ II
y Data Center Operations Controls
y Jadwal pemrosesan komputer untuk sales dan cash receipts batches harus ditetapkan dengan jelas.
y Sistem informasi dan pegawai bagian akuntansi harus diawasi
secara aktif dan pekerjaannya direview dengan bantuan
computer processing control reports dan access logs.
y Authorization Controls
y Semua transaksi credit sales (atau service order) harus
diotorisasi oleh manajer kedit. Pada sistem yang dikomputerisasi otorisasi dilakukan dengan program aplikasi
yang dibagun dengan aturan persetujuan kredit.
y Manajer tidak terlibat dalam pengolahan sales atau pada A/R.
y Salinan permintaan barang dari sales order harus mengotorisasi
pengambilan barang dari gudang dan pemindahan barang ke
shipping dock.
General Controls of the Revenue Cycle ‐ III
y Access Controls
y Berikan password pada petugas yang diberi otorisasi untuk
mengakses A/R dan file‐file yang berhubungan dengan
customer, untuk melaksanakan tugas‐tugas yang telah
ditentukan. y Batasi terminal‐terminal untuk melaksanakan fungsi‐fungsi
yang berhubungan dengan transaksi sales dan cash receipts.
y Catat semua transaksi sales and cash receipt ke sistem.
y Sering‐seringlah mengeluarkan master file A/R dan
merchandise inventory ke magnetic tape backups
y Lindungi gudang dan lemari besi secara fisik. y Gunakan lockbox collection system pada situasi yang feasible.
Application Controls of the Revenue Cycle: Input ‐ I
1. Siapkan pre‐numbered documents dan dokumen yang dirancang dengan baik untuk dokumen sales, shipping, and cash receipts, masing‐masing dokumen
diotorisasi oleh orang yang berwenang.
2. Validasi data sales orders dan remittance advices seperti data yang disiapkan dan dimasukkan untuk
pengolahan. Pada computer‐based systems, validasi
harus dilaksanakan dengan sarana program edit check. Saat data dimasukkan ke computer‐readable medium, key verification dicocokkan.
Application Controls of the Revenue Cycle: Input ‐ II
3. Betulkan kesalahan yang terdeteksi selama data entry dan sebelum data diposting ke record‐record customer dan inventory.
4. Precompute batch control totals yang berhubungan
dengan data penting pada sales invoices (atau
shipping notices) dan remittance advices. Precomputed batch control totals haus dibandingkan
dengan totals yang dihitung selama posting ke
accounts receivable ledger dan setiap kali processing run. Pada cash receipts, total pada remittance advices harus dibandingkan dengan total pada deposit slips.
Application Controls of the Revenue Cycle: Processing ‐ I
Pindahkan barang yang dipesan dari gudang barang jadi
(finished goods warehouse) dan kirim barang‐barang hanya
berdasarkan otorisasi tertulis seperti stock request copies
2. Invoice customers hanya diberiahukan oleh bagian
pengiriman atas jumlah yang telah dikirimkan.
3. Pengeluaran credit memos untuk sales returns hanya jika
disertai bukti (seperti receiving report) telah diterima bhwa
barang memang benar‐benar dikembalikan.
4. Periksa semua perhitungan pada sales invoices sebelum
dikirim dan diposting ke customers’ accounts yang tepat. Bandingkan sales invoices dengan shipping notices and open orders, untuk meyakinkan nahwa jumlah yang dipesan
direkonsiliasi dengan order yang dikirim dan back‐ordered.
1.
Application Controls of the Revenue Cycle: Processing ‐ II
Periksa bahwa jumlah total yang diposting ke accounts receivable accounts dari batch transaksi sama dengan
precomputed batch totals, dan posting jumlah total ke
general ledger accounts yang tepat.
6. Depositokan semua kash yang diterima lengkap dengan
minimum of delay, sehingga menghilangkan
kemungkinan cash receipts yang sedang digunakan
untuk membayar pegawai atau untuk membayar petty cash funds.
7. Betulkan kesalahan yang dibuat selama tahapan
pengolahan biasanya dengan membalik kesalahan
posting ke perkiraan dan masukan data yang benar. Audit trail yang berhubungan dengan perkiraan yang dikoreksi akan menunjukkan kesalahan aslinya, the reversals, and the corrections 5.
Application Controls of the Revenue Cycle: Output
Siapkan monthly statements, yang harus diposkan ke
semua credit customers, terutama jika pendekatan
balance forward digunakan.
2. Salinan file dari semua dokumen yang berkaitan
dengan transaksi sales dan cash receipts dicek secara
periodik dengan urutan nomor pada tiap file untuk
melihat celah yang ada. Jika transaksi tidak didukung
dengan preprinted documents, seperti yang sering
terjadi pada online computer‐based systems, tandai
nomor transaksi ke transactions.
3. Siapkan daftar transaksi yang dicetak dan account summaries pada periodic basis untuk menyediakan
audit trail dan dasar untuk review.
1.
Web Security Procedures
y Authentication, user identification number dan password dibutuhkan untuk akses ke private network.
y Authorization
y Use of an Access Control List
y Accountability, untuk menetapkan tanggung jawab atas
segala modifikasi pada Web sites Web sercer log harus
dipelihara.
y Data Transmission, untuk menjaga kerahasiaan dan
integritas data yang dikirim via Web harus menggunakan
enkripsi.
y Disaster Contingency & Recovery Plan,
y Diperlukan prosedur backup yang cukup termasuk fault tolerance untuk meminimalkan gangguan yang tidak
diharapkan. y Recovery plan direncanakan untuk meyakinkan rekonstruksi
dari data yang hilang.