Mary the Queen College (Pampanga), Inc.
JASA, San Matias, Guagua, Pampanga
College of Accountancy
Subject Code: AIS Module No.11/Title: 4/ The Revenue Cycle
IT Controls
Subject Description: ACCOUNTING INFORMATION SYSTEM Period of Coverage: Week 12
Introduction: Economic enterprises both for profit and not for profit generates revenue through business
processes that constitute the revenue cycle. This chapter we will be discussing the two phase of this
transaction process the a) the physical phase involving the transfer of goods and services from the seller
to the buyer, and b. the receipt of cash by the seller as payment of accounts receivable.
It this cycle is broadly divided into sales order processing and cash receipts subsystems.
Objectives:
Be aware of operational and control implications of technology used to automate and reengineer the revenue
cycle.
Content:
IT CONTROLS
Passwords. Digital accounting records are vulnerable to unauthorized and undetected access. This may
take form of an attempt at fraud , a destructive act by a disgruntled employee, or an honest mistake.
To mitigate these risks, organization management should implement a robust password control policy to
prevent unauthorized access to computer files and programs that reside in each of the departments. The
application logic should require, and prompt, users to change passwords periodically and not allow simple
and not easy-to-guess passwords. One way of strengthening password control is to require that password
should sufficiently be long (6 or 8 characters) and consist of both alphabetic and numeric characters.
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. Two common methods for achieving multilevel security are the access control list (ACL)
and role-based access (RBAC). The ACL method assign privileges, such as the right to perform computer
program procedures and access data files, directly to the individual. RBAC involves creating standard tasks
(e.g., cash receipts processing) called roles. Each roles assigned access privileges to specific data and
procedures, such as the right to add a record to the cash receipt journal. Once a role is created, individuals
are assigned to it.
POINT-OF-SALE (POS) SYSTEMS
POS systems, like the one shown in figure 4-17, are used extensively in grocery stores, department stores
and other types of retail organizations. In this example, the organizations maintain no customer accounts
receivable; all transactions are for cash, checks, or bank debit/credit cards. Also, inventory is kept on the
store shelves, not in a separate warehouse. Customers personally pick the items they wish to buy and carry
them to the checkout location where the transaction begins.
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 depository.
Finally, a batch program summarizes the sales and cash receipts journals, prepares a journal voucher and
post to the GL accounts as follows:
Dr Cr
Cash [Link]
Cash over/short [Link]
Accounts Receivable ( credit card company) [Link]
Cost of Goods Sold [Link]
Sales [Link]
Inventory [Link]
REENGINEERING USING EDI
Doing Business via EDI
Many organizations have reengineered their sales order process through electronic data interchange (EDI).
EDI technology was devised to expedite routine transactions between manufacturers and wholesalers, and
between wholesalers and retailers. The customer’s computer is connected to the seller’s computer via a
private network or the internet. When the customer’s computer system detects the need to order
inventory, it automatically transmits a purchase order (customer order to the seller. The seller’s system
receives the customer order and process it automatically. This system employs little or no human
involvement.
REENGINEERING USING THE INTERNET
Doing Business on the internet
Thousands of organizations worldwide have home pages on the internet to promote their products and
solicit sales. By visiting the seller’s homepage, a potential customer can access the seller’s product list, scan
the product line, and place an order. Typically, Internet sales are credit card transactions that are sent to
the seller’s e-mail file.
Evaluation: Class discussions and activity
References: Accounting Information System Book By James A. Hall
Next Lesson:
Prepared by: Ma Socorro M Sunglao, CPA Checked by: William I. Asenci, Approved by: Lanie M.
MBA CPA MBA, Dean, College of Galvan, PhD (VPAA)
Accountancy