Page 214 - Accounting Information Systems

CHAPT E R 4 The Revenue Cycle 185

Data Processing Department
At the end of the day, the batch program reconciles the journal voucher with the transaction file of cash
receipts and updates the AR subsidiary and the general ledger control accounts (AR—Control and Cash).
This process employs the direct access method described earlier. Finally, the system produces a transaction
listing that the AR clerk will reconcile against the remittance list.

REENGINEERED CASH RECEIPTS PROCEDURES
The task of opening envelopes and comparing remittance advices against customer checks is labor-inten-
sive, costly, and creates a control risk. Some organizations have reengineered their mail room procedures
to effectively reduce the risk and the cost.
The mail room clerk places batches of unopened envelopes into a machine that automatically opens
them and separates their contents into remittance advices and checks. Because the remittance advice con-
tains the address of the payee, the customer will need to place it at the front of the envelope so it can be
displayed through the window. When the envelope is opened, the machine knows that the first document
in the envelope is the remittance advice. The second is, therefore, the check. The process is performed
internally and, once the envelopes are opened, mail room staff cannot access their contents.
The system uses special transaction validation software that employs artificial intelligence capable of
reading handwriting. The system scans the remittance advices and the checks to verify that the dollar
amounts on each are equal and that the checks are signed. Any items that are inconsistent or that the vali-
dation system cannot interpret are rejected and processed separately by hand. The system prepares a com-
puter-readable file of cash receipts, which is then posted to the appropriate customer and general ledger
accounts. Batches of checks are sent to the cash receipts department for deposit in the bank. Transaction
listings are sent to management in the AR, cash receipts, and general ledger departments for review and
audit purposes.
Organizations with sufficient transaction volume to justify the investment in hardware and software
have the advantages of improved control and reduced operating costs. The system works best when a
high degree of consistency between remittance advices and customer checks exists. Partial payments,
multiple payments (a single check covering multiple invoices), and clerical errors on customer checks
complicate the process and may cause rejections that require separate processing.

POINT-OF-SALE (POS) SYSTEMS
The revenue cycle systems that we have examined so far are used by organizations that extend credit to
their customers. Obviously, this assumption is not valid for all types of business enterprises. For example,
grocery stores do not usually function in this way. Such businesses exchange goods directly for cash in a
transaction that is consummated at the point of sale.
POS systems like the one shown in Figure 4-20 are used extensively in grocery stores, department
stores, and other types of retail organizations. In this example, only cash, checks, and bank credit card
sales are valid. The organization maintains no customer accounts receivable. Inventory is kept on the
store’s shelves, not in a separate warehouse. The customers personally pick the items they wish to buy
and carry them to the checkout location, where the transaction begins.

DAILY PROCEDURES
First, the checkout clerk scans the universal product code (UPC) label on the items being purchased with
a laser light scanner. The scanner, which is the primary input device of the POS system, may be handheld
or mounted on the checkout table. The POS system is connected online to the inventory file from which
it retrieves product price data and displays this on the clerk’s terminal. The inventory quantity on hand
is reduced in real time to reflect the items sold. As items fall to minimum levels, they are automatically
reordered.