ACC2400 Week 8: The Revenue Cycle

Revenue Cycle (RC)

The recurring business activities and data-processing operations to provide goods/services and collect cash.

The "4 Rights" Objective

Deliver the right product, to the right customer, at the right time, for the right price.

Four Core Activities of the Revenue Cycle

1. Sales Order Entry, 2. Shipping, 3. Billing, 4. Cash Collection.

Enterprise Resource Planning (ERP) Advantage

A shared database that integrates the AIS with other functions, enabling seamless information flow.

Electronic Data Interchange (EDI)

Standardized electronic transmission of business documents to automate frequent transactions.

Credit Approval Segregation of Duties

Sales staff view credit limits but cannot modify them; only the credit manager approves credit changes.

Stockouts vs. Excess Inventory

Stockouts risk losing customers; excess inventory ties up organizational resources.

Packing Slip vs. Bill of Lading

Packing slip lists shipped goods/quantities; bill of lading is a legal transit contract detailing carrier and terms.

Threat: Failure to Bill

Results in lost revenue; controlled by separating shipping/billing and reconciling documents periodically.

Credit Memo

Authorizes a reduction in customer receivables; issued exclusively by the credit manager.

Controls to Prevent Cash Theft

Segregation of duties, EFT/FEDI, bank lockboxes, and depositing daily cash receipts.

Process-Threat-Control Framework

Exam approach analyzing: 1. Process, 2. Threat, 3. Corresponding internal control.