a recurring set of business activities and related information processing operations associated with providing goods and services to customers and collecting cash in payment for those sales.
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Revenue cycle primary objective
to provide the right product in the right place at the right time for the right price.
a metric to evaluate overall performance of revenue cycle activities.
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3 steps to sales order entry process
1. taking the customer's order 2. checking and approving customer credit 3. checking inventory availability.
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sales order document
an electronic form displayed on a computer monitor screen.
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Electronic data interchang (EDI)
the use of computerized communications and a standard coding scheme to submit business documents electronically in a format that can be automatically processed by the recipient's information system.
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Basic threat for sales order entry
important data about the order is either missing or inaccurate.
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2nd threat for sales order entry
the legtimacy of orders.
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credit limit
the maximum allowable account balance that management wises to allow for a customer based on the customer's past credit history and ability to pay.
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Accounts receivable aging report
a roport listing customer account balances by length of time outstanding.
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back order
a document authorizing te purchase or production of items that is created when there is insufficient inventory to meet customer orders.
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picking ticket
document that athorized removal of merchandise from inventory.
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3rd threat for sales order entry
uncollectible accounts
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4th threat to sales order entry
stockouts or excess inventory
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5th threat to sales order entry
loss of customers
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Customer relationship management systems (CRM)
a system that contains customer-related data organized in a manner to facilitate custoer service, sales, and retention.
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1st threat to shipping
picking the wrong items or the wrong quantity
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2nd threat to shipping
theft of inventory
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3rd threat to shipping
shipping errors (delay, or failue to ship)
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2 steps to shipping
1. picking and packing the order 2. shipping the order
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packing slip
list the quantity and description of each item included in the shipment.
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bill of lading
document used to establish responsibility for shipping goods via a third party.
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1st threat of billing
failure to bill
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2nd threat to billing
billing errors
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3rd threat to billing
posting errors in accounts receivables
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4th threat to billing
inaccurate or invalid credit memos
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sales invoice
a document that notifies customers of the amount to be paid and where to send payment.
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2 ways to maintain accounts receivables
1. open-invoice method 2. balance-forward method
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open-invoice method
method of maintaining customer accounts that generates paments for each individual sales transaction.
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remittance advice
a turnaround document returned by the customers with payment.
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balance-forward method
method of maintaining accounts receivable in which customers typically pay according to the amount shown on a monthly statement, rather than by individual invoices.
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monthly statements
a document summerizing all transactions that occurred during the past month and informing customers of their current account balance.
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cycle billing
producing monthly statements for subsets of customers at different times.
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credit memo
a document used to authorized reducing the balance in a customer account.
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1st threat of cash collections
theft of cash
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2nd threat of cash collections
cash flow problems
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remittance list
a document listing all checks received by mail.
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lockbox
post office box to which customers send payments
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electronic funds transfer (EFT)
the transfer of funds between two or more organizations or individuals using computers and other automated technology.
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financial electronic data interchange (FEDI)
a system theat integrates EFT and EDI information.
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cash flow budget
a budget that shows projected cash inflows and outflows for a specified period so that an organization can anticipate the need for short-term borrowing.
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Expenditure cycle
a recurring set of business activities and related information processing operations associated with the purchase of and payment for goods and services.
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Primary objective of expenditure cycle
minimize the total cost of acquiring and maintaining inventories, supplies, and th various services the organization needs to function.
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4 basic expenditure cycle activities
1. Ordering materials, supplies, and services 2. Receiving materials, supplies, and services 3. Approving supplier invoices 4. Cash disbursements.
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general threat for expenditure cycle
inaccurate or invalid master data
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general threat for expenditure cycle
unauthorized disclosure of sensitive information
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general threat for expenditure cycle
loss or destruction of data
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general threat for expenditure cycle
poor performance
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threat to ordering
inaccurate inventory records
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threat to ordering
purchasing items not needed
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threat to ordering
purchasing at inflated prices
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threat to ordering
purchasing goods of inferior quality
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threat to ordering
unreliable suppliers
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threat to ordering
purchasing from unauthorized suppliers
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threat to ordering
kickbacks
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When ordering one must....
identify what, when, and how much to purchase
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Economic order quantity (EOQ)
the optimal order size to minimize the sum of ordering, carrying, and stockout costs.
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Ordering cost
all expenses associated with processing purchase transactions
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Carrying cost
cost associated with holding inventory
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Stockout cost
cost that result from inventory shortages, such as lost sales or production delays
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Reorder point
specifies when to order
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Materials requirements planning (MRP)
an approach to inventory management that seeks to reduce required inventory levels by improving the accuracy of forecasting techniques to better schedule purchases to satisfy production needs.
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Just-in-time (JIT) inventory system
a system that minimizes or vitually eliminates manufacturing inventories by scheduling inventory deliveries at the precise times and locations needed.
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Difference between MRP and JIT
production scheduling
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Purchase requisition
a document or electronic form that identifies the requistioner; specifies the delivery location and date needed; identifies the item numbers, descriptions, quantity, and price of each item requested; and may suggest a vendor.
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Factors in selecting suppliers
1. price 2. quality of material 3. dependability in making deliveries
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purchase order
a document or electronic form tat formally requests a supplier to sell and deliver specified products at designated prices.
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blanket purchase order
a commitment to purchase specified items at designated prices from particular supplier for a set time period, often one year.
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vendor-managed inventory
practice in which manufacturers and distributors manage a retail customer's inventory using EDI.
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reverse auctions
suppliers compete with one another to meet demand at the lowest price
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pre-award audit
used for large purchases that involve formal bids by suppliers
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threat to receiving
accepting unordered items
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threat to receiving
mistakes in counting
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threat to receiving
verifying receipt of services
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threat to receiving
theft of inventory
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receiving report
document details about each delivery, includig the date received, shipper, supplier, and purchase order number.
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debit memo
a document used to record a reduction to the balance due to a vendor.
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threat to approving
errors in supplier invoices
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threat to approving
mistakes in posting to accounts payable
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voucher package
the set of documents used to authorized paymebt to a vendor. it consists of a purchase order, receivng report, and vendor invoice.
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nonvoucher system
a method for processing accounts payable in which each approved invoice is posted to individual vendor records in the accounts payable file and is then stored in an open invoice file.
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voucher system
a method for processing accounts payable in which a disbursement voucher is prepared instead of posting invoices directly to vendor records in the accounts payable subsidiary ledger.
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disbursement voucher
a document that identifies the vendor, list the outstanding invoices, and indicates the net amount to be paid after deducting any applicable discounts and allowances.
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advantages of voucher system
1. reduce the number of checks that need to be written. 2. prenumbered to simplify tracking all payables 3. provides an explicit record that a vendor invoice has been approved for payment.
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evaluated receipt settlement (ERS)
an invoiceless appproach to accounts paable tat replaces the three-way matching process with a two-way math of te pruchase order and receiving report.
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procurement card
a corporate credit card that employees can use only at disgnated suppliers to purchase specific kinds of items.
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threat to cash disbursements
failure to take advantage of discounts for prompt payment
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threat to cash disbursements
paying for items not received
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threat to cash disbursements
duplicate payments
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threat to cash disbursements
theft of cash
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threat to cash disbursements
check alteration
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threat to cash disbursements
cash flow problems
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imprest fund
a cash account with two characteristics: 1. it is set at a fixed amount 2. vouchers are required for every disbursement.
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Production cycle
a recurring set of business activities and related information processing operations associated with the manufacture of products.
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4 basic activities of the production cycle
1. product design 2. planning and scheduling, production operations 4.cost accounting
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General threats to production cycle
1. inaccurate or invalid master data 2. unaurhorized disclosure of sensitive information. 3. Loss or destruction of data
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