Page 182 - Accounting Information Systems

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chapter

The Revenue Cycle

conomic enterprises, both for-profit and not-for-
profit, generate revenues through business processes
E that constitute their revenue cycle. In its simplest
form, the revenue cycle is the direct exchange of finished
goods or services for cash in a single transaction between a
seller and a buyer. More complex revenue cycles process
sales on credit. Many days or weeks may pass between the
point of sale and the subsequent receipt of cash. This time
lag splits the revenue transaction into two phases: (1) the
physical phase, involving the transfer of assets or services
from the seller to the buyer; and (2) the financial phase,
involving the receipt of cash by the seller in payment of the
account receivable. As a matter of processing convenience, Learning Objectives
most firms treat each phase as a separate transaction. Hence,
the revenue cycle actually consists of two major subsys- After studying this chapter, you should:
tems: (1) the sales order processing subsystem and (2) the Understand the fundamental tasks
cash receipts subsystem. performed in the revenue cycle,
This chapter is organized into two main sections. The regardless of the technology in
first section presents the conceptual revenue cycle system. It place.
provides an overview of key activities and the logical tasks, Be able to identify the functional
sources and uses of information, and movement of account-
departments involved in revenue
ing information through the organization. The section con- cycle activities and trace the flow
cludes with a review of internal control issues. The second of revenue transactions through the
section presents the physical system. A manual system is organization.
first used to reinforce key concepts previously presented.
Be able to specify the documents,
Next, it explores large-scale computer-based systems. The
journals, and accounts that provide
focus is on alternative technologies used to achieve various
audit trails, promote the mainte-
levels of organizational change from simple automation to
nance of historical records, support
reengineering the work flow. The section concludes with a
internal decision making, and sus-
review of personal computer (PC)-based systems and con-
tain financial reporting.
trol issues pertaining to end-user computing.
Understand the risks associated with
the revenue cycle and recognize the
controls that reduce those risks.
Be aware of the operational and
control implications of technology
used to automate and reengineer the
revenue cycle.