Professional Documents
Culture Documents
Acctis10e Ch04 Ce
Acctis10e Ch04 Ce
Acctis10e Ch04 Ce
The Revenue
Cycle
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2
The Conceptual System
• Using data flow diagrams (DFDs) you can trace the
sequence of activities through three processes that
constitute the revenue cycle for most retail, wholesale,
and manufacturing organizations.
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3
OVERVIEW OF REVENUE CYCLE ACTIVITIES
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4
DFD of Sales Order Processing System
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5
Sales Order
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6
OVERVIEW OF REVENUE CYCLE ACTIVITIES
(continued)
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7
Bill of Lading
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8
OVERVIEW OF REVENUE CYCLE ACTIVITIES
(continued)
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9
Journal Voucher
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10
OVERVIEW OF REVENUE CYCLE ACTIVITIES
(continued)
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11
Inventory Subsidiary Ledger
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12
Accounts Receivable Subsidiary Ledger
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13
OVERVIEW OF REVENUE CYCLE ACTIVITIES
(continued)
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14
DFD Sales Return Procedures
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15
Credit Memo
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16
OVERVIEW OF REVENUE CYCLE ACTIVITIES
(continued)
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17
OVERVIEW OF REVENUE CYCLE ACTIVITIES
(continued)
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18
DFD of Cash Receipts Procedure
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19
Remittance Advice
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20
Cash Receipts Journal
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21
Physical Systems
• Physical accounting information systems are a
combination of computer technology and human activity.
• As a general rule, smaller businesses tend to rely less on
technology and more on manual procedures, whereas
larger companies tend to employ advanced technologies.
• Point-of-sale (POS) systems are revenue systems in
which no customer accounts receivable are maintained
and inventory is kept on the store’s shelves, not in a
separate warehouse.
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22
BASIC TECHNOLOGY REVENUE CYCLE
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23
BASIC TECHNOLOGY SALES ORDER
PROCESSING SYSTEM
• Sales Department
• Credit Department Approval
• Warehouse Procedures
• The Shipping Department
• The Billing Department
• Accounts Receivable, Inventory Control, and General
Ledger Departments
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24
Basic Technology Sales Order Processing System
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25
Basic Technology Sales Order Processing System
(continued)
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26
Structures for AR and Inventory Subsidiary Files
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27
BASIC TECHNOLOGY CASH RECEIPTS SYSTEM
• Mail Room
• Cash Receipts
• Accounts Receivable
• General Ledger Department
• Controller’s Office
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28
Basic Technology Cash Receipts System
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 29
ADVANCED TECHNOLOGY REVENUE CYCLE
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 30
INTEGRATED SALES ORDER PROCESSING
SYSTEM
• Sales Procedures
• The process begins with sales clerks receiving customer
orders, which may be hard-copy documents or may be
received via e-mail, fax, or phone.
• Using a computer terminal connected to a central sales order
system, the clerk enters the sales order.
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 31
Integrated Sales Order System
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 32
INTEGRATED CASH RECEIPTS SYSTEM
• Mail Room
• Cash Receipts Department
• Automatic Data Processing Procedures
• Controller’s Office
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 33
Integrated Cash Receipts System
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 34
REVENUE CYCLE RISKS AND INTERNAL
CONTROLS
• Risk of Selling to Un-Creditworthy Customers
• Physical Controls
• TRANSACTION AUTHORIZATION
• SEGREGATION OF DUTIES
• IT Controls
• AUTOMATED CREDIT CHECKING
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 35
REVENUE CYCLE RISKS AND INTERNAL
CONTROLS (continued)
• Risk of Shipping Customers Incorrect Items or Quantities
• Physical Controls
• INDEPENDENT VERIFICATION
• IT Controls
• SCANNER TECHNOLOGY
• AUTOMATED INVENTORY ORDERING
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 36
REVENUE CYCLE RISKS AND INTERNAL
CONTROLS (continued)
• Risk of Inaccurately Recording Transactions in Journals
and Accounts
• Physical Controls
• TRANSACTION AUTHORIZATION
• ACCOUNTING RECORDS
• Prenumbered documents are documents (sales orders,
shipping notices, remittance advices, and so on) sequentially
numbered by the printer that allow every transaction to be
identified uniquely.
• SPECIAL JOURNALS
• SUBSIDIARY LEDGERS
• GENERAL LEDGERS
• FILES
• INDEPENDENT VERIFICATION
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 37
REVENUE CYCLE RISKS AND INTERNAL
CONTROLS (continued)
• Risk of Inaccurately Recording Transactions in Journals
and Accounts (continued)
• IT Controls
• DATA INPUT EDITS
• AUTOMATED POSTING TO SUBSIDIARY AND GL
ACCOUNTS
• FILE BACKUP
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 38
REVENUE CYCLE RISKS AND INTERNAL
CONTROLS (continued)
• Risk of Misappropriation of Cash Receipts and Inventory
• Physical Controls
• TRANSACTION AUTHORIZATION
• SUPERVISION
• ACCESS CONTROLS
• SEGREGATION OF DUTIES
• IT Controls
• MULTILEVEL SECURITY
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 39
REVENUE CYCLE RISKS AND INTERNAL
CONTROLS (continued)
• Risk of Unauthorized Access to Accounting Records and
Reports
• Physical Controls
• ACCESS CONTROLS
• SEGREGATION OF DUTIES
• IT Controls
• PASSWORDS.
• MULTILEVEL SECURITY: Multilevel security employs
programmed techniques that permit simultaneous access to a
central system by many users with different access privileges
but prevent them from obtaining information for which they lack
authorization.
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 40
REVENUE CYCLE RISKS AND INTERNAL
CONTROLS (continued)
• Risk of Unauthorized Access to Accounting Records and
Reports (continued)
• IT Controls (continued)
• MULTILEVEL SECURITY (continued): The access control list
(ACL) is a list containing information that defines the access
privileges for all valid users of the resource. An access control
list assigned to each resource controls access to system
resources such as directories, files, programs, and printers.
The role-based access control (RBAC) is a formal technique
for grouping users according to the system resources they
require to perform their assigned tasks. A role is a formal
technique for grouping users according to the system
resources they require to perform their assigned tasks.
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 41
Summary of Revenue Cycle Risks and Controls
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 42
POINT-OF-SALE (POS) SYSTEMS
• POS systems are used extensively in grocery stores,
department stores, and other types of retail organizations.
• Inventory is kept on the store’s shelves, not in a separate
warehouse.
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 43
Point of Sale System
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 44
DAILY PROCEDURES
• The Universal Product Code (UPC) is a label containing
price information (and other data) that is attached to items
purchased in a point-of-sale system.
• When all the UPCs are scanned, the system automatically
calculates taxes, discounts, and the total for the
transaction.
• The clerk enters the transaction into the POS system via
the register’s keypad, and a record of the sale is added to
the sales journal in real time.
• At the end of the clerk’s shift, a supervisor unlocks the
register and retrieves the internal tape.
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 45
END-OF-DAY PROCEDURES
• At the end of the day, the cash receipts clerk prepares a
three-part deposit slip for the total amount of the cash
received.
• One copy is filed and the other two accompany the cash
to the bank.
• Because cash is involved, armed guards are often used to
escort the funds to the bank repository.
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 46
POINT-OF-SALE CONTROL ISSUES
• Authorization
• Supervision
• Access Control
• Accounting Records
• Independent Verification
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 47
REENGINEERING USING EDI
• Doing Business via EDI
• Electronic data interchange (EDI) is the intercompany
exchange of computer-processable business information in
standard format.
• EDI is more than just a technology.
• EDI poses unique control problems for organizations.
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 48
REENGINEERING USING THE INTERNET
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 49
Appendix – Sales Return System
• Receiving Department
• Sales Department
• Processing the Credit Memo
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 50
Basic Technology Sales Returns System
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 51
Appendix - Legacy Systems
• Batch Processing Using Sequential Files
• DATA ENTRY
• EDIT RUN
• SORT RUN
• AR UPDATE AND BILLING RUN
• SORT AND INVENTORY UPDATE RUNS
• GENERAL LEDGER UPDATE RUN
• Batch Processing Using Direct Access Files
• KEYSTROKE
• EDIT RUN
• FILE UPDATE RUN
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 52
Batch Processing with Sequential Files
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 53
Update of Accounts Receivable from Sales Orders
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 54
Update of Inventory from Sales Orders
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 55
Batch Sales Order System
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 56
Direct Access Update for AR and Inventory Files
Concurrently
James A. Hall, Accounting Information Systems, 10th Edition. © 2019 Cengage. All Rights Reserved.
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 57