MODULE 4

z
THE
REVENUE
CYCLE
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Learning outcomes

§ Understand the fundamental tasks performed in the revenue cycle, regardless of

the technology in place.

§ Be able to identify the functional departments involved in revenue cycle activities

and trace the flow of revenue transactions through the organization.

§ Be able to specify the documents, journals, and accounts that provide audit
trails, promote the maintenance of historical records, support internal decision
making, and sustain financial reporting.

§ Understand the risks associated with the revenue cycle and recognize the
controls that reduce those risks.

§ Be aware of the operational and control implications of technology used to

automate and reengineer the revenue cycle.
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TOPICS

§ I. CONCEPTUAL REVENUE CYCLE

§ II. PHYSICAL REVENUE CYCLE SYSTEMS

§ III. REVENUE CYCLE RISKS AND INTERNAL CONTROLS

§ IV. THE ELECTRONIC DATA INTERCHANGE

§ V. DOING BUSINESS USING THE INTERNET

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THE REVENUE CYCLE

PHYSICAL REVENUE CYCLE
SYSTEMS
CONCEPTUAL REVENUE CYCLE (VARYING DEGREES OF COMBINATION OF
TECHNOLOGY AND HUMAN ACTIVITIES)

BASIC TECHNOLOGY SYSTEMS

*OVERVIEW OF KEY ACTIVITIES

*LOGICAL TASKS ADVANCED INTEGRATED SYSTEMS
*SOURCES AND USES OF
INFORMATION
*AND THE MOVEMENT OF POINT OF SALE SYSTEMS
ACCOUNTING INFO IN THE ORG

ELECTRONIC DATA INTERCHANGE

INTERNET SALES SYSTEM

 z THE REVENUE CYCLE: CONCEPTUAL
SYSTEM
SALES ORDER PROCESSING CASH RECEIPTS
SALES RETURNS SUBSYSTEM
SUBSYTEM

PHYSICAL PHASE FINANCIAL PHASE

THE ORDER FULFILLMENT : COLLECTION : RECEIPT OF

DELIVERY PAYMENT FROM THE BUYER
 z THE CONCEPTUAL SYSTEM: THE
ACTIVITIES

SALES ORDER SALES RETURN CASH RECEIPTS

PROCEDURES PROCEDURES PROCEDURES
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The conceptual system
SALES ORDER
PROCEDURES

1. RECEIVE ORDER

2. CHECK CREDIT

3. PICK GOODS

4. SHIP GOODS

5. BILL CUSTOMER

6. UPDATE ACCOUNTING
RECORDS: SALES JOURNAL,
INVENTORY SUBSIDIARY
LEDGER, AR S/L
GENERAL LEDGER
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1
3

2
7C
b

7A 7C

4 6 7C
a
7B

Taken from Accounting Information Systems by James Hall. 10th edition

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The conceptual system
SALES RETURN PROCEDURES

1. PREPARE RETURN SLIP

2. PREPARE CREDIT MEMO

3. APPROVE CREDIT MEMO

4. UPDATE SALES JOURNAL

5. UPDATE INVENTORY AND AR RECORDS

6. UPDATE GENERAL LEDGER

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1 3B 4Ca

2 4
3A C

3 4B
4A
C

4Ba
4D
3
4Aa
C
a
4D
a
4Db
Taken from Accounting Information Systems by James Hall 10th edition
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THE CONCEPTUAL SYSTEM

CASH RECEIPTS PROCEDURES

1. OPEN MAIL AND PREPARE REMITTANCE LIST

2. RECORD AND DEPOSIT CHECKS.

3. UPDATE ACCOUNTS RECEIVABLE RECORD

4. RECONCILE CASH RECEIPTS AND DEPOSITS

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3B
4
1
a
6a
3B

2
6

3A

5
6b

5 3Aa
4 a

Taken from Accounting Information Systems by James Hall 10th edition

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END OF SYNC SESSION 6