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Revenue Cycle and Expenditure Process

The document outlines the revenue cycle activities including sales order procedures, sales return procedures, and cash receipts procedures, emphasizing the importance of internal controls such as transaction authorization and segregation of duties. It also contrasts manual sales order processing with a computer-based accounting system, highlighting efficiency improvements. Additionally, the expenditure cycle is described, detailing the purchasing process and goals for reliable vendor relationships and quality items.

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Shana Villamor
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10 views3 pages

Revenue Cycle and Expenditure Process

The document outlines the revenue cycle activities including sales order procedures, sales return procedures, and cash receipts procedures, emphasizing the importance of internal controls such as transaction authorization and segregation of duties. It also contrasts manual sales order processing with a computer-based accounting system, highlighting efficiency improvements. Additionally, the expenditure cycle is described, detailing the purchasing process and goals for reliable vendor relationships and quality items.

Uploaded by

Shana Villamor
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

REVENUE CYCLE

Activities:
1. Sales Order
2. Credit/Customer System
3. Shipping
4. Billing/AR
5. Cash Receipts/ Collections

Sales Order Procedures:


a. Receive Order
b. Check Credit
c. Pick Goods
d. Ship Goods
e. Bill Customer
f. Update Inty records
g. Update AR
h. Post to GL

Sales Return Procedures: to reverse the effects of the original sales transaction
- Shipped wrong merchandise
- Defective
- Damaged in shipment
- Buyer refused because delivery was delayed

a. Prepare Return Slip


b. Prepare CM
c. Approve CM
d. Update Sales Journal
e. Update Inty and AR records
f. Update GL

Cash Receipts Procedures:


a. Open Mail and Prepare Remittance Advice
Remittance advice- payment date, acct number, amount paif and customer cjheck
number is a form of a turnaround document
b. Record and Deposits Checks
c. Update AR
d. Update GL

Internal Controls
1. Transaction authorization
a. Credit check - creditworthiness
b. Return policy - processing of sales returns
c. Remittance list - verifying customer checks
2. Segregation of duties
- Formal authorization is an independent event
3. Supervision
- Deterrent to dishonest acts, important in the mail room
4. Accounting records
- Prenumbered documents - sequentially numbered
- Special journals - grouping similar transactions together into special journals
- Subsidiary Ledgers
- GL
5. Access
- Access to both cash and GL could remove cash from the firm and adjust the cash
acc to cover the act
6. Independent verification

Manual Sales Order Processing:


1. Sales Dept
2. Credit Dept
3. Warehouse
4. Shipping Dept
5. Billing Dept
6. Gen Acctg

Computer-Based Accounting System


- Decrease in the amt of paper
- Disk or tape instead manual journals
- Input still from a hard copy

EXPENDITURE CYCLE - PURCHASES AND CASH DISBURSEMENTS

GOALS:
1. Reliable vendors
2. High-quality items
3. Best possible price
4. Properly authorized
5. When they are needed
6. Those items ordered
7. Not lost, stolen, or broken
8. Pay for the items

It begins at when there's a need for an item

PURCHASE SYSTEM - begins in the Inty Ctrl Dept when inty levels drop to reorder levels
1. Purchase requisition
2. Purchase order
3. Receiving Report
4. Supplier’s Invoice
5. Journal voucher
6. GL

Physical phase - purchasing cycle


Financial phase - cd

Database:
- Master Files - suppliers, ap, merchandise inty
- Transaction and Open Document Files - po, invoice, de
- Others

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