Chapter 5: Sales and Collection Process

Sales

Events documenting the transfer of goods or services to customers and the corresponding recognition of revenue for the organization.

Cash

The organization’s monies in bank or related accounts. The instances of the class are individual accounts. This is considered a resource.

Journal entries for selling product on credit and receiving payment

For selling product on credit:

Dr. AR

Cr. Sales Taxes Payable

Cr. Sales

For Receiving Payment:

DR. Cash

Cr.AR

Journal entry for selling products for cash

Dr. Cash

Cr. Sales Taxes Payable

Cr. Sales

Journal entry for recording cost of sales

Dr. COGS

Cr. Inventory

Sales Activity Model (BPMN)

collaboration model

A BPMN model showing two participant pools and the interactions between them within a process.

Using knowledge of Sunset Graphic,create a collaboration sales activity model

Using knowledge of Sunset Graphic,create a collaboration sales activity model with only choreography

-emphasizes the CHOREOGRAPHY – message flows between pools;

leaves the Customer pool opaque.

choreography

the science of examining raw data (now often Big Data), removing excess noise from the dataset, and organizing the data with the purpose of drawing conclusions for decision making.

More BPMN Model Refinement, consider exceptions to the process when the supplier does not have the products necessary to fulfill the customer’s order.

Notes: Subprocess represents the PURCHASING activities without the detail; the INTERMEDIATE BOUNDARY ERROR EVENT shows exception flow.

subprocess

Represent a series of process steps that are hidden from view in BPMN. The use of subprocesses in modeling helps reduce complexity.

Create an internet sales activity model using this process

1) Customers select items and they are moved to the customer's cart. The customer elects to check out and enters the order and shipping information as well as the credit card payment information.

2) The credit card payment is confirmed by the credit card processor,

3) Sunset employees prepare the products,

4) apply some limited graphics if ordered

5) ship the products to the customer.

orders are cancelled when the credit card payment is denied.

The customer enters credit card information until confirmed or until the customer exceeds a reasonable number of tries; depict a looping task to show this

Business rules help ensure that

information systems operate in a consistent and effective manner

Business rules are

are constraints on the process.

•Business rules implement control activities, such as

–Approvals, authorizations, verifications, and reconciliations

–Reviews of operating performance

–Security of assets and segregation of duties

Business rules are developed through three elements

•Identify important business events – using BPMN diagrams

•Define conditions that might affect objectives for each event

•Determine appropriate actions for each condition

•Access controls limit

who can use and change records in the system

•Application controls ensure

data integrity and an audit trail

Partner Authority, Application control, or access control

Partners preparing quotes cannot modify established product and service prices

Partners accepting orders cannot modify established product and service prices; Partners accepting orders cannot approve request for customer credit > $1,000.

Access controls

Partner Authority, Application control, or access control

Partner must provide quote within 1 business day of request; Manager must approve quotes > $5,000

Partner must record order within one hour of receipt; Manager must approve orders > $5,000; Credit manager must approve credit order > $1,000

Partner Authority

Partner Authority, Application control, or access control

System must provide quote number control, default values, range and limit checks, and create audit trail

System must provide order number control, default values, range and limit checks, and create audit trail; system links quote to order

Application Controls

Application controls include a variety of input validation checks including

1. Field Checks

2. Validity Checks

3. Limit and range checks

4. Reasonableness checks

5. Completeness checks

Field checks ensure that

each entry is the correct data type, such as numbers or dates.

Validity checks ensure that

•each entry contains acceptable values, often implemented by dropdown lists or calendars to select dates.

Limit and range checks ensure

entries are within appropriate limits.

Limit checks ensure that

entries are less than an upper bound

Range checks ensure that

that entries are between established upper and lower bounds.

Reasonableness checks compare

entries in one field against related fields to ensure values are reasonable

Completeness checks ensure

all required fields are entered before a record can be created or updated

The primary purpose of an UML model of the sales and collection process is to

•create a blueprint for the development of a relational database to support the collection, aggregation, and communication of process information.

To develop UML class diagrams, the REA framework (resources, events, and agents) is

is a proven approach to describing business processes in a way that meets both accounting and broad management information requirements

Make a Model of Sunset’s Quotes (3 first)

1.Each Sunset Partner may participate in a minimum of zero Quotes and a maximum of many Quotes, but each Quote involves only one Sunset Partner

2.Each Customer may participate in zero to many Quotes and each Quote is prepared for only one Customer

3.Each Quote specifies prices and quantities for at least one product; each Product can be quoted a minimum of 0 and a maximum of many times.

Add the Order Event

each Quote can result in a minimum of 0 orders and a maximum of many orders; each Order is related to a minimum of 0 and a maximum of 1 Quote (some orders don’t have quotes).

Add Cash Receipts

5) Indicates that each Order is related to a minimum of 0 and maximum of 1 Cash Receipt (an Order is a receivable until paid).

6) Indicates that each Cash Receipt is deposited into one and only Cash (bank) account.

Type images apply __ to their resources, events, and agents to help manage the business process

guidelines, constraints, and descriptive information

Type images also support

summarization of the economic activity to support management’s information requirements

Add Type Images to the Model

Type images categorize Products and Orders. Employees are assigned to manage Product Categories.

7) Indicates that Products are categorized by Product Category; Orders are categorized by Order Status.

8) Indicates that each Employee can be assigned to manage a minimum of 0 and maximum of many Product Categories; each Product Category is managed by one and only one Employee.

Multiplicities indicate location of ___ for one-to-many associations.

foreign keys

Multiplicities indicate linking tables for

many-to-many associations

For one to many associations The primary key of the class on the ___ side becomes the foreign key of the class on the ___ side .

1. one side

2. * side

When the maximum multiplicity on both sides is *, the primary key of the new table is

the combination of the primary keys of the linked tables.

Create a Generic Sales and Cash Receipts UML Model

Inventory, Sales, Employees, Customers, Cash Receipts, Cash

1.Each customer participates in a minimum of zero and a maximum of many sales.

2.Each sale involves a minimum of one and a maximum of many inventory items.

3.Each cash receipt (e.g., one check from a customer) is deposited into one and only one account, and each account is associated with a minimum of zero cash receipts and a maximum of many cash receipts. These multiplicities reflect typical business practices.

4.These multiplicities depend on the nature of the business. So, there are no typical multiplicities for this association.