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Internal Control of Revenue Cycle

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Internal Control of Revenue Cycle

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Revenue Cycle and Control Activities

The revenue cycle for many companies is considered the primary source to earn revenue from the sale of goods or service. Good controls must be established to maintain the effectiveness of receivables and credit sales, not doing so can harm the company and might be costly to the business. Six classes of internal controls guides us in evaluating and designing transaction processing. They are authorization, supervision, segregation of duties, access control, independent verification, and accounting records. We will discuss each department that is involved in the revenue cycle, it's activities, and control activities.The first section discusses the departments that make the revenue cycle , starting with Sales Department and ending with Billing Department, knowingly that collections must be received and adjustments must be made. The second section discusses the six activities mentioned earlier.

Departments

The revenue cycle is composed of five independent (in activities and personnel) departments that are required to make function and make a sale. Each department carry out it's own, and every department depends on the the preceding department in order to function properly. An additional two activities must be considered in the revenue cycle are collection of receivables and adjustments to sales and receivables.

Sales Department

Every sales process starts with receiving a customer purchase order- by mail, in person, or telephone. Thus controlling the customer's orders is carefully done, and operating procedures must be maintained in an adequate manners. The department then identifies and reviews items and quantities to determine whether the order can be placed, then they prepare The Sales Order. The sales order is not the standard format that the seller's order processing system needs. The sales order has vital information, such as the customer's name account number, description of the items sold quantities, and...