Accounting 3600 Chapter 10

Front 1

revenue cycle

Back 1

recurring set of business activities dealing with transactions related to customers

Front 2

1) sales order entry
2) shipping
3) billing
4) cash collections

Back 2

4 main business activities

Front 3

1) take order
2) check customer credit
3) check inventory availability
4) respond to customer inquiries

Back 3

4 steps of sales order entry

Front 4

sales order document

Back 4

document created when the order is actually taken

Front 5

- item #s
- customer #
- quantity
- price
- sales person

Back 5

sales order document components

Front 6

1) websites
2) choice boards

Back 6

IT impact on efficiency and effectiveness (2 components)

Front 7

websites

Back 7

allow customers to enter the order data and do some free marketing

Front 8

choice boards

Back 8

interactive sales order entry systems that allow customers to customize the product to meet specific and exact needs

Front 9

1) completeness check
2) validity check (item #/customer #)
3) reasonableness check

Back 9

edit checks related to gathering data - 3

Front 10

credit limit

Back 10

maximum allowable account balance for a customer

Front 11

1) general authorization
2) specific authorization

Back 11

2 types of credit approval

Front 12

general authorization

Back 12

automated authorization process for existing customers in good standing; should add the order to any exisitng balance on the customer's account -- must be less than or equal to their credit limit

Front 13

specific authorization

Back 13

un-automated authorization; requires credit managers to approve the sale

Front 14

1) new customers
2) existing customers wanting to exceed limit
3) existing customers in bad standing

Back 14

specific authorization situations - 3

Front 15

preventive control

Back 15

credit approval - type of control

Front 16

accounts receiving aging report

Back 16

lists all accounts receivable based on the length of time outstanding

Front 17

analyze the collectability, credit term reasonableness and estimate the bad debt expense

Back 17

purpose of the accounts rec aging report

Front 18

inventory availability

Back 18

check done to advise the customer when goods will be shipped

Front 19

picking ticket

Back 19

lists item numbers and quantities of each item in teh order; serves as the authorization for warehouse personnel to remove inventory from the warehouse

Front 20

Shipping

Back 20

second main business activity in revenue cycle

Front 21

1) picking/packing
2) shipping

Back 21

shipping activity 2 main steps

Front 22

picking and packing

Back 22

done by the inventory warehouse personnel, triggered by a picking ticket. Send the goods and the picking ticket to shipping

Front 23

shipping

Back 23

done by the shipping department; counting the actual # of goods (quantity rec. from the warehouse). compare with the picking ticket quantities and sales order document quantities

Front 24

1) update inventory on hand field in inventory system
2) packing slip generated to be sent to customer
3) generates bill of lading - 4 copies

Back 24

shipping department enters the quantity of goods sent to customer- accomplishes 3 things:

Front 25

packing slip

Back 25

lists items and quantities, contained in the shipment

Front 26

bill of lading

Back 26

legal document that identifies who is responsible for the goods in transit; generated via shipping department

Front 27

1) customer - in shipment
2) shipping dept - retained
3) freight carrier
4) accounting department - trigger sending invoice to customer

Back 27

4 copies of the bill of lading destinations

Front 28

1) send invoice to customer
2) maintain accounts receivable

Back 28

2 main steps in billing activity

Front 29

1) open invoice method
2) balance forward method

Back 29

2 ways to maintain accounts receivable

Front 30

open invoice method

Back 30

customers pay per invoice; a new invoice is created and sent to the customer for every sale

Front 31

1) customer to keep
2) return with payment --> remittance advise (turnaround doc)

Facilitates early payment discounts

Back 31

2 copies of invoice sent to customer - reasoning

Front 32

balance forward method

Back 32

customers pay based on a monthly statement hat shows all activity since the last monthly statement

Front 33

1) writeoff - uncollectibles
2) returned goods

Back 33

Acct Rec adjustments that need credit manager authorization - 2

Front 34

credit memo

Back 34

created by the credit manager authorizes accounts rec to reduce the customers account balance

Front 35

mailroom personnel open, make list of checks; checks sent to cashier.

remittance advise and copy of checks list sent to acct rec. to update subsidiary ledger

Back 35

cash collections process

Front 36

lockbox

Back 36

cash collections alternative process - send payment directly to bank; more expensive