The Revenue Cycle

Lyka Mae A. Miranda

BSA - A
 01 Sales Order Procedures
CONTENTS
Revenue Cycle Activities

、
02 Sales Return Procedures
、
03 Cash Receipts Procedures
、
04 Basic Technology Sales
、 Order Processing System
 Revenue Cycle

The revenue cycle

is a recurring set of

Revenue business activities

and related
The direct exchange of finished
information
goods or services for cash in a single processing

transaction between a seller and a operations

associated with
buyer
providing goods and
services to
 Sales Order Procedures

Receive Order Check Credit Pick Goods Ship Goods

The sales process Before processing The receive order Before the arrival of
begins with the order further, activity forwards the goods, the
customer order the customer’s the stock release shipping dep’t.
indicating the type creditworthiness document (picking receives the
and quantity of needs to be ticket) to the pick packing slip and
merchandise established goods function in shipping notice
desired. the warehouse from the receive
order function.
 Sales Order Procedures

Bill Customer Update Inventory Update A/R Post to General

Records Records Ledger
The shipment of The inventory control The general ledger
Customer records in
good marks the function updates function has received
the Accounts
completion of inventory journal vouchers from
Receivable
the economic subsidiary ledger the billing and
Subsidiary Ledger
event and the accounts from info inventory control asks
are updated from
point a which contained in the and an AR account
info provided by the
customer should stock release summary for posting
sales order
AR – Control
be billed Cost of Goods Sold
XXX document
XXX
Sales Inventory – Control
 Sales Return

An organization can
Sales Return expect that a
Reasons: certain percentage
• The company shipped the wrong merchandise of its sales will be
• The goods were defective returned. The buyer
• The product was damaged by shipment requests credit for
• The buyer refused delivery because goods the unwanted
shipped too late or delayed in transit products.
 Sales Return Procedures

Prepare Return Slip Prepare Credit Memo Approve Credit Memo Update Sales Journal
The receiving Upon receipt of the The credit manager Upon receipt of
department return slip, the sales evaluates the approved credit
employee counts, employee prepare a circumstance of the memo, the
inspects, and credit memo – an return and make transaction is
prepares a return authorization for the judgment to grant (or recorded in the
slip describing the customer to receive disapprove) the sales journal as a
items credit credit and return to contra entry
sales dep’t
 Sales Return Procedures

Update Inventory and Update General

AR Records Ledger
The inventory control
Upon receipt of the
function adjusts the
journal voucher
inventory records
and account
and forwards the
summary info, the
credit memo to AR,
general ledger
where customer’s
function reconciles
account is also
the figures and post.
adjusted
Cash Receipts
The Sales Order Procedure
described a credit transaction that resulted
in the establishment of account receivable.
Payment on the account is due at some
future date, which the terms of trade
determine. Cash Receipts Procedures
apply to this event.
 Cash Receipts Procedures

Open Mail and Prepare Record and Deposit

Remittance List Checks
A mail room employee A cash receipt Cash
opens envelopes employee verifies and xxx
containing customer’s reconcile the
Accounts Receivable – Control
payments and
xxx
accuracy ad
remittance advices completeness of the
then deliver to checks against the
administrative clerk and prelist (remittance
record it to a list), checks are then
remittance list after recorded in the cash
 Cash Receipts Procedures

Update AR Records Update General Reconciles Cash

Ledger Receipts and Deposits
Upon receipt of
The remittance A clerk from the
journal voucher and
advices are used controller’s office
account summary,
to post to the reconciles Cash
general ledger
customer’s Receipts to (1) copy of
reconciles the
accounts in the prelist, (2) deposit slip,
figures, post to
AR subsidiary (3) related journal
cash and AR
ledger vouchers.
control accounts
 Basic Technology
Revenue Cycle
Physical Systems
The computers
Physical Accounting Information used in these
System are a combination of computer systems are
technology and human activity. independent
As a general rule, smaller businesses tend (non-networked)
to rely less on technology and more on manual PCs. So,
procedures, whereas large companies tend to information flows
employ advanced technologies. between
departments are
 Sales Order Procedures

Sales Department Credit Department Warehouse Procedures Shipping Department

Approval The warehouse clerk The shipping clerk
The sales process reconciles the products
Credit Department used the received
begins with received with the
Clerk verifies the stock release copy
customer shipping notice copy of
customer’s of the sales order to
contacting the sales order received. If
creditworthiness by locate inventory then
correct, a bill of lading is
dep’t. Then, the
using dep’t sent to shipping dep’t. prepared. Clerk then uses
clerk manually
computer to review Clerk then uses the the dep’t PC to record in
records the details the shipping log and
credit history in the dep’t PC to record the
on a sales order. sends the shipping
Customer’s inventory reduction in
notice and stock release
Record File the stock records
AR, Inventory Control, & General Ledger Departments

Upon receipt from the billing

department, the AR and Inventory control
clerks update their respective subsidiary
ledgers. Periodically, the AR and Inventory
control clerks prepare hard-copy journal
vouchers and account summaries and
send to GL dep’t for reconciliation and
posting to GL accounts.
Thank You!