Académique Documents
Professionnel Documents
Culture Documents
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-1
Kaye Watson.
key terms
• balance forward method • open invoice method
• bill of lading • picking slip
• billing • post-invoicing
• cash on delivery • pre-invoicing
• credit limit • remittance advice
• cycle billing • statement of accounts
• delivery note • tax invoice
• Goods and Services Tax • terms of payment
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-2
Kaye Watson.
Revenue cycle
• Deals with transaction processing involved in
selling goods or services
• Sales can be made for cash or on credit
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-3
Kaye Watson.
Revenue cycle business activities
Main functions (cash sale):
• accepting customer requests for goods or services
• delivery of goods or services
• invoicing
• dealing with returned goods
• receiving and recording customer payments
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-4
Kaye Watson.
Revenue cycle business activities
Additional functions (credit sale):
• approving credit and credit limits
• recording accounts receivable
• sending periodical statements to customers
• dealing with bad debts
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-5
Kaye Watson.
Revenue cycle business activities
Categories of activities in revenue cycle:
1. processing customer orders
2. delivery/shipping
3. invoicing
4. accounts receivable ledger
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-6
Kaye Watson.
Processing customer orders
• Customer orders:
– accepting requests from customers
– preparing sales order
• Approving credit and credit limits:
– screening new customers
– setting maximum limit
– processing requests to increase limit
– periodic checks on existing customers
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-7
Kaye Watson.
Delivery/shipping of goods or
providing a service
• Delivery/shipping of goods:
– receiving sales order
– preparing the dispatch order and delivery notes
• Providing a service:
– recording labour and materials used (job card)
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-8
Kaye Watson.
Invoicing
and recording accounts receivable
• Details on sales invoice:
– invoice number
– name of supplier
– ABN
– date of invoice
– description of goods
– quantity of goods
– GST inclusive price
– discount allowed
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-9
Kaye Watson.
Terms
• 2/7 - 2% discount if account is paid within 7 days
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-10
Kaye Watson.
Types of invoicing
• Pre-invoicing:
– invoice prepared when sales order is approved
• Post-invoicing:
– invoice prepared and dispatched after delivery of
goods or services
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-11
Kaye Watson.
Accounts receivable ledger
• Customers referred to as debtors
• Accounts receivable is an asset
• Subsidiary ledger maintains asset details
• Source document for this ledger is sales invoice
issued
• Statement of accounts sent to customers at end of
each period showing details of account transactions
and outstanding balance
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-12
Kaye Watson.
Accounts receivable ledger
• Credit or adjustment notes:
– prepared when goods are returned
– recorded in sales returns journals
• Bad debts:
– amounts owing by debtors that are unable to be
collected
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-13
Kaye Watson.
Accounts receivable ledger
• Revenue cycle ends with customer payments
that may take the form of:
– cash – from cash sales
– cheques – most common form of payment
– bank transfers
– direct deposits or EFT
• Details of all payments are recorded in the
cash receipts journal
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-14
Kaye Watson.
Sales function
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-15
Kaye Watson.
Sales returns function
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-16
Kaye Watson.
Internal controls procedures for the
revenue cycle
• Prompt transfer of customer orders to sales orders
• Strict procedures for granting credit
• Set policy on credit amounts and terms and discounts
• Prompt invoicing in separate department
• Segregation of duties on
– dispatch
– invoice preparation
• Proper authorisation procedures for discounts, returns and
allowances and bad debt write offs
• Sequentially pre-numbered invoices, receipts etc.
• Cash registers with sealed till roles
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-17
Kaye Watson.
Computer application systems for
the revenue cycle
Computers play an important role where large numbers
of transactions are processed:
– record the information in the same categories as a
manual system
– quickly produce the documentation required
– record reservation of goods and services ordered
– easily generate detailed reports for management use
– reduce labour costs
– reduce errors in pricing etc.
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-18
Kaye Watson.
Controls in the computer
environment
Application controls required:
• Input controls
– detect and prevent errors when data is input
• Processing controls
– detect and prevent errors while processing is in progress
• Output controls
– detect and prevent errors in outputs from processing
© 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Accounting Information &
Reporting Systems by A. Aseervatham and D. Anandarajah. Slides prepared by 12-19
Kaye Watson.