Ais Financing Cycle

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INTRODUCTION

C HAPTER 10
The Revenue Cycle: Sales to Cash Collections

• Questions to be addressed in this chapter include:
– What are the basic business activities and data processing operations that are performed in the revenue cycle? – What decisions need to be made in the revenue cycle, and what information is needed to make these decisions? – What are the major threats in the revenue cycle and the controls related to those threats? 1 of 160 © 2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart 2 of 161

© 2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

Romney/Steinbart

INTRODUCTION
• The revenue cycle is a recurring set of business activities and related information processing operations associated with: – Providing goods and services to customers – Collecting their cash payments

INTRODUCTION
• The primary objective of the revenue cycle:
– Provide the right product in the right place at the right time for the right price.

• The primary external exchange of information is with customers.

© 2008 Prentice Hall Business Publishing

Accounting Information Systems, 11/e

Romney/Steinbart

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Romney/Steinbart

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INTRODUCTION
• Decisions that must be made:
– Should we customize products? – How much inventory should we carry and where? – How should we deliver our product? – How should we price our product? – Should we give customers credit? If so, how much and on what terms? – How can we process payments to maximize cash flow? © 2008 Prentice Hall Business Publishing Accounting Information Systems, 11/e Romney/Steinbart 5 of 161

INTRODUCTION
• In this chapter, we’ll look at:
– How the three basic AIS functions are carried out in the revenue cycle, i.e.: • Capturing and processing data. • Storing and organizing the data for decisions. • Providing controls to safeguard resources (including data).

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Accounting Information Systems, 11/e

Romney/Steinbart

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1

REVENUE CYCLE BUSINESS ACTIVITIES
• Four basic business activities are performed in the revenue cycle: – Sales order entry – Shipping – Billing – Cash collection

SALES ORDER ENTRY
• Sales order entry is performed by the sales order department. • The sales order department typically reports to the VP of Marketing. • Steps in the sales order entry process include: – – – – Take the customer’s order. Check the customer’s credit. Check inventory availability. Respond to customer inquiries (may be done by customer service or sales order entry). Accounting Information Systems, 11/e Romney/Steinbart 8 of 161

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© 2008 Prentice Hall Business Publishing

Orders

Customer
Re jec te d

1.1 Take Order
O rd e rs

Customer

SALES ORDER ENTRY
• How IT can improve efficiency and effectiveness:
– Orders entered online can be routed directly to the warehouse for picking and shipping. – Sales history can be used to customize solicitations. – Choiceboards can be used to customize orders. • Initially popular with Dell and Gateway. • Now used for purchases of shoes and jeans!

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Orders

Response

Inquiries

Ac

kn

ow

le

dg

m

Customer

en

1.2 Approve Credit
t
Approved Orders

DFD for Sales Order Entry

1.3 1.4
Resp. to Cust. Inq.

Sales Order

Check Inv. Avail.
Sales Order

Inventory
B ac kO rd e r s

Sales Order

Packing List

Shipping
© 2008 Prentice Hall Business Publishing

Billing

Warehouse

Purchasing
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SHIPPING
• The second basic activity in the revenue...
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