Which function or department reconciles the products received from the warehouse with the shipping notice copy of the sales order received?

Economic entities, both for-profit and not-for-profit, generate revenues through business processes that constitute their revenue cycle. In its simplest form, according to , -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. 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, most firms treat each phase as a separate transaction. Hence, the revenue cycle actually consists of two major subsystems: (1) the sales order processing subsystem and (2) the cash receipts subsystem.

AIS D5Segregation of DutiesSegregating duties ensures that no single individual ordepartment processes a transaction in its entirety.The number of employees and the volume of transactions beingprocessed influence how to accomplish the segregation.1. Transaction authorization should be separate from transactionprocessing. Within the revenue cycle, the credit department issegregated from the rest of the process, so formal authorizationof a transaction is an independent event. The importance of thisseparation is clear when one considers the potential conflict inobjectives between the individual salesperson and theorganization. Often, compensation for sales staff is based ontheir individual sales performance. In such cases, sales staffhave an incentive to maximize sales volume and thus may notadequately consider the creditworthiness of prospectivecustomers. By acting in an independent capacity, the creditdepartment may objectively detect risky customers and disallowpoor and irresponsible sales decisions.2. Asset custody should be separate from the task of assetrecord keeping. The physical assets at risk in the revenue cycleare inventory and cash, hence the need to separate assetcustody from record keeping. The inventory warehouse hasphysical custody of inventory assets, but inventory control (anaccounting function) maintains records of inventory levels. Tocombine these tasks would open the door to fraud and materialerrors. A person with combined responsibility could steal or loseinventory and adjust the inventory records to conceal the event.Similarly, the cash receipts department takes custody of the

Chapter 4CHAPTER 4THE REVENUE CYCLEREVIEW QUESTIONS

Chapter 41.The packing slip travels with the goods to the customer, and it describes thecontents on the order. Upon filling the order, the shipping department sends theshipping notice to the billing department to notify them that the order has beenfilled and shipped. The shipping notice contains additional information that thepacking slip may not contain, such as shipment date and carrier and freightcharges. The bill of lading is a formal contract between the seller and thetransportation carrier; it shows legal ownership and responsibility for assets intransit.2.The receiving department counts and inspects items that are returned bycustomers. The receiving department prepares a return slip, copies of which goto the warehouse for restocking, and to the sales order department so that acredit memo can be issued to the customer.3.The general ledger clerk receives a total of all sales from the billing department inthe form of a summary journal voucher. The accounts receivable departmentsends an account summary of the individual accounts receivable so that theaccounts receivable control account can be verified against the accountsreceivable ledger. The inventory control department sends summary informationin the form of a journal voucher that reflects the total reductions of inventory infinancial terms and the associated charges to cost of goods sold.4.a.credit checksb.returns policy for granting cash refunds and credits, andc.cash prelists providing verification that customer checks and remittanceadvices match in amount.

Chapter 45.The three rules that ensure segregation of functions are:

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Chapter 47.The objective of re-engineering is to greatly reduce costs by identifying andeliminating non value-added tasks and also by streamlining necessary existingprocesses.8.A point of sale system immediately records both cash and credit transactions andinventory information. The sales journal, accounts receivable, and inventoryaccounts may be updated in real-time, or a transaction file may be used to laterupdate a master file.

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invoice, sales department, Sales Journal

Who should reconcile the products received from the warehouse with the shipping notice copy of the sales order received?

Which department prepares the shipping notice?

Which department should perform the activities of matching shipping documents?

Which function or department receives the stock release copy of the sales order and uses this to locate the inventory?