INFS7004 Accounting Information Systems

Lecture 4 Transaction Cycles: The Revenue Cycle

1

The Conceptual System
The Revenue Cycle

The revenue cycle is the set of activities in a business which brings about the exchange of goods or services with customers for cash. Most business transactions are conducted on a credit basis. Cash is received after goods are shipped to the customer.

2

Sales Order 1 Credit / Customer Service 2

REVENUE CYCLE (SUBSYSTEM) Cash Receipts/ Collections 6

Shipping 3

Billing/ Accounts Receivable 4/5

Journal Vouchers/Entries: How do we get them?
 Billing Dept. prepares a journal voucher:
Accounts Receivable Sales DR CR

 Inventory Control Dept. prepares a journal voucher:
Cost of Goods Sold Inventory DR CR

 Cash Receipts Dept. prepares a journal voucher:
Cash Accounts Receivable DR CR
4

Sales Order Procedures
 Sales order procedures include the task

involved in receiving and processing a customer order, filling the order and shipping products to the customer at the proper time, and correctly accounting for transaction.

5

Receive Order
 At this point, sale process begins indicating

the type and quantity of merchandise desired by customer.  It may or may not be a physical document  Orders may arrive by mail, by telephone, or from a field representative who visited the customer  After creating the sales order, a copy of it is placed in the customer open order file.
6

Check Credit
 For new customer, full financial investigation

is required to establish a line of credit.  For old customer, credit checking on subsequent sales may be limited on history of payment of bills and that the current sale does not exceed the pre-established limit.

7

Pick Goods
 Receive order activity forwards the stock

release document  Provides formal authorization for warehouse