Accounting Information Systems 5th Edition Parkes Solutions Manual Full Chapter PDF

Accounting Information Systems 5th
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Solutions manual
to accompany
Accounting information
systems
5th edition
by
Parkes, Olesen and Blount
Prepared by
Alison Parkes
© John Wiley & Sons Australia, Ltd 2017

Chapter 10: Transaction cycle – the revenue cycle
Discussion questions
10.1 Berwick Ltd has always had a strategy of cost leadership; that is, selling high
volumes of low-cost products at a competitive price. During a recent sales slump,
Berwick Ltd saw its sales revenues drop dramatically and has decided to move
strategically to a product differentiation strategy; that is, to sell lower volumes of
high-quality products at a premium price.
(a) What are the implications of this strategy change for the revenue cycle?
(LO1)
(b) What changes would you expect to see in the revenue cycle?
(LO4)
(c) What are the implications of this strategy change in terms of the
usefulness of historical sales data for decision making?
(LO3)
(a) This strategy change will have big implications for the revenue cycle, which is
fundamentally driven by the level of sales. All existing policies and procedures will be geared
around volume, and pricing targets flowing from the cost leadership (high volume / low
price) strategy. To move to a product differentiation (high price / high quality) strategy
requires revisiting and realigning existing policies and procedures. In particular quality
control should receive more attention than under the previous strategy.
(b) Assessing changes in the order of the processes in the revenue cycle:
1.1 The inventory check would be performed as described however the policy relating to
tolerances on inventory decisions may alter, allowing Berwick Ltd to reject orders that they
may previously have processed. The logic behind this is that under a cost leadership strategy
customer service, while still important, may be overridden by desire to maintain sales volume
however a product differentiation strategy promotes a desire to maintain high levels of
customer satisfaction and service. Risking offending a customer by supplying goods of
insufficient quality may be acceptable under cost leadership, but is less acceptable under
product differentiation. As an example, using a product differentiation strategy Berwick
Ltd.’s policy may indicate that if there are less than 2 of a requested item on hand the
customer should be advised that stocks are low and there is a small possibility of a delay.
Under cost leadership this policy may change to indicate that staff should accept all orders
where stock available is greater than zero.
1.2 Using a similar logic to 1.1 – the policy establishing the tolerance levels for credit limit
acceptance / rejection may be tightened to allow only suitable orders to progress to
fulfilment.
© John Wiley and Sons Australia, Ltd 2017 10. 1

Solutions manual to accompany: Accounting information systems 5e by Parkes et al.
1.3. The only activity potentially affected here is the notification to the customer. While still
important, the procedural aspects may be changed to endorse a lower cost alternative. As an
example a customer previously advised via an automatically generated non-personalised
email notification could now receive a phone call from their dedicated sales representative
2.1, 2.2, & 2.3. The activities around picking, packing and shipping the goods would all be
affected by volume and speed considerations. Handling lower volumes of goods may require
changes to be made to physical working spaces and the related logistics considerations. It
may be effective to introduce quality assurance technology to manage some previously
manual functions, such as picking goods (robots), or checking shipment quantities (bar codes
and scanners). Policies would need to be reviewed to check for the presence of internal
controls designed to promote high quality outcomes as it will become more important to
ensure compliance with these policies so only high quality products are delivered. Human
resource policies should also be checked to ensure that any motivators offered for staff
conducting these activities are aligned to the new strategy.
3.1 & 3.2. Volume considerations as discussed in relation to process 2.0 would also be a
consideration here. Depending on how automated the billing cycle currently is at Berwick Ltd
they may need to consider introducing a higher degree of data integration and automation for
billing to ensure the timeliness and completeness of invoices raised. Berwick Ltd may also
need to consider a complete revamp of their billing system. Introducing a post-billing system
(if not already in place) may be highly desirable, particularly given the move to less
customers and sales for higher price which would tend to reduce the incidence of non-
payment or late payment.
4.1 & 4.2. Receiving and recording payments will be affected by sales volume as the
customer base is likely to end up consisting of a moderate level of customers with repeated
buys. Berwick Ltd should spend some time analysing the likely outcome in order to guide
planning before making any policy or procedural changes. Irrespective of the volumes
expected, Berwick Ltd should consider offering less expensive payment channels such as
online payments, if these are not already made available to customers; they may also wish to
issue electronic, rather than paper based, customer statements. Any opportunity to improve
customer service should be taken, as this will improve their ability to price goods higher than
competitors in the marketplace. If credit policies have been relaxed then the procedures for
detection and follow up of outstanding customer accounts should be examined with the
intention of ensuring early follow up and debt resolution, given the potential liquidity
problems associated with higher levels of bad debts.
(c) Careful modelling and analysis would be required before historic sales data would be
suitable for use in any decision making task. Sales data is used in decisions relating to
marketing, production, purchasing and human resource related activities, so the implications
of the strategy change are immense. Berwick Ltd may need to adopt a heuristic to deal with
this issue, for example they may assume that volumes under a differentiation strategy are
likely to be historic volumes reduced by a factor of x and adjust all analysis to allow for this.
In addition pricing decisions should be altered to include consideration of the ability of the
market to bear a particular price, rather than being based solely on costs of production as is
common under a cost leadership strategy. Berwick Ltd would need to be very careful
whatever approach they take; as even a slightly incorrect assumption abut [pricing levels
could have an unpredictably large effect.

10.2 Mascolo Ltd has decided to introduce PayPal to allow their customers to pay for
goods they have bought online.
(a) What controls would you expect to see introduced to ensure the safety of
Mascolo’s customer data?
(LO5)
(b) Which activities in the receive and record payment process will be
affected?
(LO2, LO4)
(c) What changes would you expect to see in these activities?
(LO4)
(d) What metrics could you use to measure the success of this initiative post
implementation?
(LO6)
(a) Mascolo Ltd should ensure that they limit access to the PayPal account to those staff who
genuinely need this access to perform their regular duties.
(b) Both Receiving (4.1) and Recording (4.2) of payments would be affected.
(c) The most important change is that payments will be received by the PayPal account, not
credited directly to the company bank account. Cash held in the PayPal account needs to be
regularly transferred across to the company bank account. The company also needs to create
well controlled processes covering when and how payments are receipted. Presumably this
will happen on arrival in the PayPal account so regular reconciliations of the PayPal account
transactions, bank account transfers and total receipted would be required.
(d) Average payment times, number of bad debts, accounts receivable aging.
10.3 Stannus Ltd has just realised that it has a problem with sales data as its sales
order system records sales to customers that subsequently fail a credit check.
(a) What decisions made during the revenue cycle would be affected by this
data problem?
(LO3, LO4)
(b) How would those decisions be affected? How would this data problem
affect the performance of the revenue cycle?
(LO3, LO4, LO6)
(c) How would this data problem affect other processes at Stannus Ltd?
(LO1, LO3, LO4, LO6)
(a) The decision whether to approve a sale would be affected. If a sale can be recorded before
the credit check completes then there is a strong possibility that sales are being approved
which should not be. The only way to correct this would be to cancel the sale after the failed
credit check occurs, which is not only inefficient, it could also lead to customer
dissatisfaction.

(b) The revenue cycle would be affected as Sales would be overstated, and there is a risk that
Accounts Receivable levels will increase, along with an increase in bad debts. Also the
efficiency of the process will be compromised if these invalid sales have to be subsequently
detected and corrected.
(c) The main impact of this data problem is potentially on the revenue process however
liquidity and cash planning functions may also be affected depending on the volume of
invalid sales involved.
10.4 Prior Ltd has a reconciliation problem. The amount of cash receipted and
banked by the cashier does not seem to agree with the amount allocated against
open invoices in the accounts receivable customer records. Prior Ltd seems to
have good controls — it separates the receipting and recording of cash, and it
regularly conducts a reconciliation.
(a) Which internal controls might be missing?
(LO5)
(b) What documentation would you examine in order to investigate this
problem?
(LO4)
(a) Prior Ltd should look at internal controls around cash receipting. Specifically they should
check for reconciliations between cash receipted and cash allocated. Prior Ltd should check
that cash receipts are checked and reconciled against hash or batch totals, and that customers
receive regular account statements.
(b) Cash receipts reports, accounts receivable (receipt allocation) batch input reports
10.5 Dowling Ltd has a new Sales Manager who is keen to improve process efficiency.
She has reviewed the process documentation for the sales cycle and has asked
you to remove the credit check as it is slowing down the sales process and she is
concerned Dowling Ltd is losing sales as a result.
(a) Should you agree to remove the credit check? Why or why not?
(LO1, LO3, LO5)
(b) If you do not agree with removing the credit check, how would you
explain this decision to the CEO?
(LO1, LO5)
(c) If you do agree with removing the credit check, how would you justify
this change to the Accounts Receivable Manager?
(LO1, LO5)
(d) If you remove the credit check, will you need to measure the process
performance differently?
(LO1, LO6)
(a) You should not agree to remove this credit check – the risk is too high. This is a vital
internal control and removing it will likely lead to high levels of default on account payments
and potentially liquidity and cash flow problems.

(b) The Sales Manager needs to understand that this control is in place specifically to
safeguard against payment defaults, and that to remove it risks damaging cash flows and
liquidity.
(c) The justification for the change to the Accounts Receivable Manager would need to be
framed around changing the responsibility for ensuring payment of accounts. To function
properly this responsibility would ideally need to be assigned to the Sales Manager who
removed the credit check.
(d) Performance expectations for the Accounts Receivable and Sales managers would need to
be changed to reflect the removal of the credit check but in reality the Accounts Receivables
manager’s performance is always going to be assessed on rates of recovery and levels of bad
and doubtful debts.

Problems
The case narrative below (AB Hi-Fi) will be used to complete problems 10.1–10.14.
Make sure you read and understand the activities and the case thoroughly before you
commence work on the problems.

Problems 10.1 -10.14 diagram solutions are included below. All diagrams are indicative
only. In addition to the diagrams a table is included for each sub process that identifies
and explains the flows depicted in the various diagrams.
Sub-process 1.0 processing the sales order
(Questions 10.1, 10.2, 10.3a, 10.4a, 10.5a)
Flow Narrative Comments

#’s
1.1, 2, Customers browse the AB Hi-Fi online store looking for For a customer to be able to browse the
&3 products to purchase from the product catalogue. products online they need to request the
web page (1), causing the computer to
extract the product details (2) and
displays them (3)
1.4 When they have located an item they wish to purchase they
click on a ‘buy this item’ link located underneath the item
required.
1.5 The computer displays a screen showing the product ID
number and asking the customer to enter the quantity of the
item required.
1.6 The customer keys in the quantity required.
1.7 The computer then displays a screen asking the customer if
they want to continue shopping.
1.8 Once the customer indicates that they do not want to continue
shopping
1.9, 10 the computer calculates and displays an order confirmation To calculate the order costs the computer
screen containing the product ID number, product price, requires price data from the product data
quantity and total cost per item for each different item ordered, store (9) before it can be displayed (10)
the shipping amount (AB have a standard shipping rate within
Australia of $10 per delivery), and a total for all items and
shipping costs. The screen asks the customer to input their
credit card and delivery details to complete the order.
1.11 The customer inputs the delivery details (name and address)
and credit card details (card number and expiry date) into the
order confirmation screen.
1.12 & The computer assigns the next sales order number to the
To assign a number the computer must
13 transaction,
first extract the details of the last number
assigned (12), increment that number and
then store the new “last number” in the
datastore (13)
1.14 then displays a screen for the customer which provides the
sales order number and confirms that the order has been
completed.
1.15 The computer records the sales order details in the sales event
datastore.
1.16 At 11 pm every evening the computer extracts details of the
days sales
1.17 and updates the inventory levels.
1.18 The computer prints a picking ticket (bar-coded sales order As this report is not printed centrally it is
number, items and quantities ) on the warehouse printer shown as a dataflow directly to the
external entity.
1.19 and produces an electronic credit card check file listing all the
credit card details (customer name, credit card number, and
expiry date) from the previous days’ sales.

Sub-process 2.0 picking packing and shipping the goods
(Questions 10.1, 10.2, 10.3b, 10.4b, 10.5b)

#’s
2.1 At 8 am every morning the warehouse clerk collects the picking
tickets from the warehouse printer
2.2 and picks the required goods from the shelf. If any of the goods In line with process documentation
are not available the warehouse clerk puts back any goods they standards we do not document
have already picked for the order and places the picking ticket in error conditions, instead they are
a folder on their desk labelled ‘Awaiting Goods’. If all the goods flagged on the flowchart
are available
2.3 the warehouse clerk takes the goods and the picking ticket to the
shipping department.
2.4 & The shipping clerk scans the sales order number from the picking When the number is scanned and
5 ticket, and sent to the computer (4) the
computer needs to extract the sales
order data (5) in order to display it
2.6 the computer displays the order on the screen.
2.7 The shipping clerk manually checks each item picked against the
original sales order, and the picking ticket.
2.8 The shipping clerk also checks the name on the sales order The credit card status report is
against the names highlighted on the credit card status report. If highlighted and sent to the clerk
the name on the order matches a name on the credit card status during Sub-process 3.0.
report, the goods and the picking ticket are sent back to the Note the timing problem here due
warehouse with a note attached indicating they cannot be shipped to poor process design the report is
due to non-payment. Once they are satisfied that the credit card not able to be provided in a timely
payment is not invalid, and that the correct items are being manner
shipped,
2.9 the shipping clerk checks a box on the sales order to indicate that
shipping is complete.
2.10 The computer updates the sales order
2.11 and inventory data.
2.12 The computer also prints a delivery slip for the order on a printer
in the shipping department.
2.13 The shipping clerk attaches the delivery slip to the goods and
places them on the loading dock.
2.14 Every day at 3 pm a carrier picks up the goods from the loading The delivery to the customer is not
dock and delivers them to the customer. shown as it is outside the scope the
process being documented. ABs
process ends when the goods are
collected by the courier

Sub-process 3.0 billing the customer
(Questions 10.1, 10.2, 10.3c, 10.4c, 10.5c)

#’s
3.1 & The computer sends the electronic credit card check file that was The computer needs to extract the
2 produced at 11 pm to the bank’s computer for verification. data (1) before it can send it (2)
3.3 & At 1 pm every day the bank sends an electronic report via email The email goes to the computer (3)
4 to the accounts receivable clerk indicating the status of each of which displays it for the clerk (4)
the credit card orders (valid/invalid).
3.5 & The accounts receivable clerk prints out two copies of the credit The clerk must place a request for
6 card status report. the report to be printed (5) before it
is printed (6)
3.7 The accounts receivable clerk files one copy of the credit card
status report
3.8 and uses a highlighter pen to mark out on the second copy the
name of any customer whose credit card was reported as invalid.
3.9 The accounts receivable clerk takes the highlighted report to the
shipping clerk who is responsible for checking that these
customers do not receive any goods.
Sub-process 4.0 receiving and recording payment
(Questions 10.1, 10.2, 10.3d, 10.4d, 10.5d)

#’s
Immediately after the bank sends the electronic status This flow is funds is not a data
report the funds for all valid credit card orders are flow so is not documented
transferred into the company’s bank account.
4.1 & The accounts receivable clerk receives an email from the The email goes to the computer
2 bank advising them of the total amount of the funds (1) which displays it for the clerk
transferred. (2)
4.3,4 The accounts receivable clerk compares the total in the The clerk needs to extract the
email to the total in the credit card status report, report from the file (3) before
they can use it (4)
4.5 if these totals agree the amount is input into the computer
4.6 and the cash receipt data store IDs updated. If the totals do
not match the problem is referred to the accounts receivable
manager for resolution.

10.1 Prepare a context diagram for the revenue process at AB Hi-Fi.

(LO4)
Carrier (3.2)
(2.14)
Online Sales
Revenue Cycle (3.3)
Bank
(4.1)

10.2 Prepare a level 0 logical DFD for the revenue process at AB Hi-Fi.
(LO4)

10.3 Prepare a process map for:

(a) process 1.0 at AB Hi-Fi
(b) process 2.0 at AB Hi-Fi
(c) process 3.0 at AB Hi-Fi
(d) process 4.0 at AB Hi-Fi.
(LO4)
(a)
AB Hi Fi Revenue Cycle
1.0 Process the sales order

Customer
Inputs delivery
Browse online Purchase Inputs sales Order
and credit card
store product? order data correct?
details
Computer
Creates and Creates and At 11pm

Creates picking Creates credit
displays sales records sales updates
tickets check file
order order inventory levels
Warehouse
Picking tickets
printed
(b)
AB Hi Fi Revenue process
2.0 Picking packing & Shipping goods

Warehouse Clerk
Collects picking
Picks goods
tickets
Shipping Clerk
Indicates
Scans sales Correct Payment Attaches
shipping
order number items? made? delivery slip
complete
Computer
Updates Sales
Retrieves sales Creates delivery
Order and
order details slip
Inventory data
Function
Collects goods
for delivery to
customer

(c)
AB Hi Fi Revenue Process
3.0 Billing the customer

Computer
Sends credit
card check file
Creates credit
Bank
Credit ok?
report
Receivable Clerk
Accounts
Prints credit Credit Marks invalid

report Invalid? payments
Function
Receives
marked up
credit report
(d)
4.0 Receiving & Recording payment
Transfers funds
Bank
and sends email

Receivable Clerk
Accounts
Inputs total cash

Totals agree?
received
Computer
Updates Cash
receipts

10.4 Prepare a level 1 logical DFD for:

(LO4)
(a)

(b)

(c)
(d)

10.5 Prepare a physical DFD for:

(LO4)
(a)
(1.1) Product
(1.3)
(1.9)
Customer
(1.4)
(1.5) (1.2)
(1.6)
(1.12)
(1.7)
(1.13)
(1.8) AB Computer
(1.10)
(1.11) Sales order
(1.14) (1.15)
(1.16)
(1.18)
(1.19)
(1.17)
Picking
Packing &
Shipping
Credit card
Inventory
check

(b)
Processing the
sales order
Warehouse
(2.1)
Clerk
(2.3) Sales Order
(2.5)
Billing the
(2.4) (2.10)
customer
(2.6) Computer
(2.8)
Shipping Clerk (2.9)
(2.11)
(2.12)
(2.14)
Inventory
Carrier
(c)
(3.2)
Credit Card
Bank
check
(3.1)
(3.3)
Computer
(3.6)
(3.5)
(3.4)
Accounts
Receivable
clerk
(3.7)
(3.9)
Credit status
Picking
Packing &
Shipping

(d)
Bank
Cash receipts
(4.1)
Computer (4.6)
(4.2) (4.5)
Credit status
Accounts
(4.3) receivable
clerk

10.6 Prepare a systems flowchart for:

(LO4)

(a)

(b)
Warehouse Clerk Computer Shipping Clerk
At 8am daily
Processing the Picking Ticket

a (2.3)
sales order
(2.1)
Scans
Picking Ticket (2.4)
Extracts sales
order
(2.5) (2.6) Sales order
Error routine not
documented Picks
Goods
Checks
item, sales
(2.2) order,
Sales Order
picking
Picking Ticket (2.7)
Highlighted Credit
Billing the
(2.3) status report (2.8)
customer
Checks Error routine not

(2.10) names documented
Complete sales
(2.9)
order
Shipping complete
(2.11)
Inventory Delivery slip
Delivery slip Picking Ticket

(2.12)
(2.13) (2.14)
Print delivery slip
Picking Ticket Attaches

& places Courier
on dock

(c)
Accounts Receivable clerk Computer
(3.2)
(3.1) Create bank report
Credit card check Bank
3)
(3.
Credit card Prepare credit
(3.4)
Status status report
Print credit status

Credit status (3.5)
report
report request
Credit status
(3.7) report 2
(3.6)
Credit Status
Report
1
Credit status
Highlights
invalid
credit
(3.8)
Highlighted credit
(3.9) status report
Picking packing
and shippng

(d)
Accounts Receivable Clerk Computer
Bank
Total funds (4.2) Processes email (4.1)
Credit status
(4.3) report
Credit status
Compares
totals
Error routine not

documented (4.4)
Process cash
(4.5) (4.6)
receipts total
Cash Receipts
Inputs cash total

10.7 10.7 Table 10.3 identifies 11 risks typically encountered when processing a sales
order.
Required
(a) Analyse the degree of exposure to each of these risks for the sales process
at AB Hi-Fi.
(b) Determine how many of the common controls described in table 10.3 are
present in the sales process at AB Hi-Fi.
(c) Prepare a short report suitable for senior management to explain how
risky you think the sales process is, and how comprehensive the current
internal controls are.
(d) Prepare a recommendation describing any changes you would like to
make to the sales process at AB Hi-Fi in order to reduce the level of risk.
(LO5)
(a)
Risk Exposure
1 Selling goods that are not available to be High – no inventory check is conducted before sale
shipped is approved / processes
2 Poor decision making — allowing an Partial - Applicable to AB as order can proceed
order to proceed when goods are not without goods being available, as no inventory check
available, or rejecting an order when conducted all orders accepted so no risk of
goods are available incorrectly rejecting an order
3 Selling goods to a customer who won’t / High – no credit check conducted at time of sale
can’t pay for the goods
4 Poor decision making, accepting a non–
Partial - Applicable to AB as order can proceed for
credit worth customer, or rejecting a
non-creditworthy customer, as no credit check
creditworthy customer conducted all orders accepted so no risk of
incorrectly rejecting a creditworthy customer
5 Creating fictitious sales High – no customer validation check conducted
6 Failure to process valid sales request Minimal – on line real time transaction processing
received from customer with outcome monitored by customer via order
confirmation while online
7 Incorrect decision outcome advised. Not applicable to AB’s online sales
8 Customer not advised of outcome Not applicable to AB’s online sales
9 Incorrect sales advised, resulting in Unable to assess – narrative does not disclose
under/ overpayment of commissions to whether commission payments are made
sales staff.
10 Incorrect goods included on picking Minimal – automated using real time data
ticket
11 Warehouse not advised of the picking Some - picking tickets may not print, or may be lost
ticket details as left on printer overnight

(b)
Control Present?
Performing inventory checks No
Unable to assess – revenue narrative
Maintaining accurate and timely perpetual inventory records,
periodically conducting physical inventory checks. does not disclose
Exception reporting for management of any sales rejected No - not applicable to AB’s online
sales
Performing credit checks No
Independent maintenance of customer accounts and credit No - not applicable to AB’s online
limits, pre-billing systems. sales
Exception reporting for management of any sales rejected. No - not applicable to AB’s online
sales
Regular monitoring of accounts receivable balances and age No
Signed purchase order form from customer No
confirming customer accounts regularly via statements of No
account
Entering data physically close to where order request is Yes – data entry performed by
received; entering data in a timely manner customer
Automation via pre-devised workflow Some automation re picking etc., but
limited on payment processing
Exception reporting of customer orders not acknowledged No - not applicable to AB’s online
within a reasonable timeframe sales
Automation using sales order data Yes
Obtaining approval from sales manager before commissions Unable to assess – revenue narrative
are paid does not disclose
Exception reporting of sales No
orders with no picking ticket generated
(c) Reports should identify that lack of inventory and credit checks increases risk, and that
internal controls in this area are deficient. Also they should be able to work out that the credit
card status is checked too late in the process to make it useable, increasing risk greatly.
(d) Should recommend that they need to check credit card status before processing sale –
particularly important in an online sales environment such as this, and in an organisation
where picking packing and despatching is automated based on the sales order acceptance.

10.8 Table 10.4 identifies eight risks typically encountered when despatching a sales
order.
Required
(a) Analyse the degree of exposure to each of these risks for the goods
despatch process at AB Hi-Fi.
present in the goods despatch process at AB Hi-Fi.
risky you think the goods despatch process is, and how comprehensive the
current internal controls are.
make to the goods despatch process at AB Hi-Fi in order to reduce the
level of risk.
(LO5)
(a)
Risk Exposure
1 Picking the wrong goods Low – picked goods are double checked by shipping clerk
2 Theft of inventory High – loose picking error process when goods are not
available could lead to opportunistic theft
3 Goods packed incorrectly Low – packed goods are double checked by shipping clerk
4 Goods labelled incorrectly Low – picked goods are double checked by shipping clerk
5 Slow/non-shipment of goods High – no way of identifying slow orders in current process,
back orders not recorded. Partial orders not dispatched
6 Theft of goods High – shipping clerk could easily steal goods
7 Goods delivered incorrectly Low – delivery slips used to identify destination
8 Theft of goods High – goods placed on dock for courier pick up, no evidence
of goods being monitored
(b)
Control Present?
Checking goods to picking ticket by an independent staff No
member
Restricting warehouse access No
Conduct random periodic physical stocktakes Unable to assess – revenue narrative
does not disclose
Independent check of packed goods to picking ticket No
Using of barcode scanners to check goods No
Firmly attaching shipping label to goods after packing Yes
Independent check of goods to picking ticket and shipping Yes
label
Exception report of goods picked but not shipped within a No
reasonable timeframe
Independent shipping authorisation check Yes
Restricted access to packed goods waiting to be delivered No
Separately and clearly packaging and labelling each order Yes
Requiring delivery driver to provide valid customer No
signature for each delivery made

(c) Report should identify that current risk is low due to checking of goods etc., controls are
good but could be made more comprehensive.
(d) Monitor goods until collected by courier. Require receipt of delivery signature.

10.9 Table 10.5 identifies three risks typically encountered when billing a sale.
Required
(a) Analyse the degree of exposure to each of these risks for the billing process at
AB Hi-Fi.
present in the billing process at AB Hi-Fi.
(c) Prepare a short report suitable for senior management to explain how risky
you think the billing process is, and how comprehensive the current internal
controls are.
(d) Prepare a recommendation describing any changes you would like to make to
the billing process at AB Hi-Fi in order to reduce the level of risk.
(LO5)
(a)
Risk Exposure
1 Failure to bill customers Low – requires credit card input before sale can be processed
2 Billing customers when no goods High – customers must input credit card before goods are
have been shipped shipped – also issue with back order handlings and no
inventory check increases risk
3 Invoice errors — both Low - outcome monitored by customer via order confirmation
overbilling and under-billing while online
(b)
Control Present?
Separation of billing and shipping Yes
functions
Pre-numbering shipping documents and No
reviewing any shipping documents not
invoiced
Use of a pre-billing system (vs. a post- No – although a pre billing type system exists the credit
billing system status is not checked until very late – then it is a manual
check and the data used is not timely
Reconciliation of sales order to shipping No – billed before shipping
documents
Using independent pricing data and/or Yes
fixed price lists
Populating price data with data from those Yes
price lists
Confirming customer accounts regularly No
(c) Report should identify billing is risky and controls not comprehensive.
(d) Automated credit card check to be conducted before sales order can be accepted.

10.10 Table 10.6 identifies three risks typically encountered when receiving and
recording payments.
Required
(a) Analyse the degree of exposure to each of these risks for the receiving
payments process at AB Hi-Fi.
present in the receiving payments process at AB Hi-Fi.
risky you think the receiving payments process is, and how
comprehensive the current internal controls are.
make to the receiving payments process at AB Hi-Fi in order to reduce
the level of risk.
(LO5)
(a)
Risk Exposure
1 Late/slow/non-payment of High – credit status checked too late in process
accounts
2 Theft of cash and/or cheques Low – direct credit to bank account from cardholders account
3 Incorrect recording of customer High –manual highlighting of credit status report will lead to
accounts errors
(b)
Control Present?
Prompt invoicing, and setting suitable No – not applicable
payment terms
Regularly and consistently following up of No
overdue accounts
Removing credit facilities for any non- No
payers
Minimising the cash handling points and No – not applicable
the numbers of people handling cash
Entering cash receipts close to where Yes
received
Using lockboxes or safes and bank No – not applicable
regularly
Immediate/prompt cheque endorsement No – not applicable
and immediate separation of remittance
advice and cheques
One-for-one checking of deposit slip and No – not applicable
cheques
Regular bank reconciliations by an No- no evidence of this
independent person
Limiting access to online banking No- no evidence of this
Creating batch or hash totals of cash No – but the total transferred is checked to the credit status
receipts and reconciling inputs to accounts report
receivable
Issuing regular customer statements, No – not applicable
incorporating use of turnaround documents

(c) Process risk is fairly low due to electronic payment processing, but risky in terms of
identification of non-payers; internal controls are not comprehensive in these areas.
(d) Record orders as unpaid until payment is actually received, then check and reconcile to
individual customer accounts.
10.11 AB Hi-Fi has adopted a cost leadership strategy. Its overall plan is to undercut
competitors on pricing and so gain market share.
(a) How well does its current revenue cycle align with this business strategy?
(b) Are there any opportunities to improve the degree of alignment between
the revenue cycle and the business strategy? Explain what you would
change and how this would improve the strategic alignment.
(LO1)
(a) Revenue cycle is fairly well aligned to a cost leadership strategy, operations are
reasonably efficient so costs can be contained and savings passed on to consumers; accepting
all orders improves market share but has risks attached.
(b) Consider introducing more stringent credit requirements and also improving picking
process relating to handling partial order fulfilment. Would align strategically to reduce costs
and therefore price point in order to generate additional market share.

10.12 (a) Identify and describe the technologies that AB Hi-Fi uses in its revenue
cycle activities.
(b) For each of those technologies you identified in part (a), how well does AB
Hi-Fi use the technology? Could you suggest a way to improve the
business benefit obtained by use of any of these existing technologies?
(c) Are there other suitable technologies available that AB Hi-Fi could be
using for the revenue cycle activities? What additional technologies could
AB Hi-Fi implement? What business benefit would these additional
technologies provide?
(LO2)
(a) and (b)
Technology Use Improvement

Internet based sales website Seems to function well Broaden sales channel by adding
based on limited more interaction with customer
evidence available re specials etc.
Integrated Integration good for Integrate payments into cycle
sales/warehouse/despatch/payment internal connections but earlier, introduce and integrate
systems payments and despatch data re successful despatch of
limited goods to customer.
Use of scanner (shipping clerk) Adequate Extend use of scanners to other
warehouse areas
Online banking (payments received) Not good use Automate identification of
and payment verification invalid cards, automate manual
cash receipt recording process
(c) CRM would help with customer focus and potentially improve level of sales; picking
could be automated to cut warehouse labour costs.

10.13 During process 2.0 Pick, pack and ship the goods at AB Hi-Fi, a shipping officer
has to decide whether to complete the shipment of goods to a customer. Take a
moment to review this section of the narrative before you complete the following
questions.
Required
(a) What data does the shipping officer draw on when making the decision?
(b) Where do the data you identified in part (a) come from?
(c) Are these data reliable, that is, is there any possibility that there could be
errors in the data?
(d) Are these data sufficient to make the decision, or can you identify
additional data that the officer should consider when making the
decision?
(e) What would be the consequences of an incorrect decision?
(LO3)
(a) Data in the Credit status report, picking ticket, sales order.
(b) Picking ticket and sales order data internally generated from AB computer, credit status
report data from bank.
(c) Credit status report is manually checked and highlighted, high risk of errors. Sales order
and picking ticket data have little or no risk of error.
(d) This data is sufficient (but potentially inaccurate).
(e) Goods would be shipped to customer who cannot/ will not pay for goods.

10.14 Explain how you would measure performance of the revenue cycle at AB Hi-Fi,
specifically:
(a) What metrics would you use to measure performance?
(b) For each metric, explain where you would obtain the data required for
that metric.
(c) For each metric, explain why it is a good metric to help measure how well
the revenue cycle is meeting its objectives.
(LO6)
(a) (b) (c)
Customer complaints/satisfaction Customer survey Would measure
complaints only, the
primary cycle risk is
shipping goods not paid
for so which would not
decrease customer
satisfaction.
Cycle time to fill and deliver orders Subtract date/time that Short cycle times indicate
delivery slip is printed efficiency in cycle
from the date/time the
sales order was accepted
% of sales on back order Check contents of Would show what
awaiting goods folder in proportion of sales orders
warehouse are waiting for inventory
items – would expect this
to be fairly high as no
inventory check
conducted
Number of bad debts written off Financial/general ledger Identify consequences of
reports lack of credit check,
determine efficiency of
current pre billing system

The case narrative below (AB Hi-Fi) will be used to complete problems 10.15–10.22.
Make sure you read and understand the activities and the case thoroughly before you
commence work on the problems.

Problems 10.15 -10.22 diagram solutions are included below. In addition to the
diagrams a table is included that identifies and explains the flows depicted in the
various diagrams.
In addition to pre-paid online sales, AB Hi-Fi offers a

credit facility to selected larger customers. These
customers receive invoices when they purchase goods, and
are sent a statement at the end of each month. Payments
made by these customers are received by the cashier.
1 Every morning the accounts receivable clerk receives a
printed report of customer receipts from the cashier. The
customer receipts report contains the customer number and
name, the amount received from each customer and the
total of the customer receipts.
2, 3, The accounts receivable clerk logs on to the computer and The solution shows the login
4 opens a new cash receipts batch. and batch request as 1 flow (2),
then the computer obtains the
next batch # (3) and displays the
batch (4)
5 The accounts receivable clerk enters the first customer
number from the customer receipts report.
6,7 The computer displays details of the open (unpaid) The computer needs to extract
invoices for that customer. the data (6) before it can display
it (7)
8 The accounts receivable clerk selects the invoices that
have been paid by clicking on a check box.
9,10 The computer calculates a total for the customer based on The computer calculates (9) and
the invoices checked. displays (10) the total
11 Once the accounts receivable clerk has checked that they
have selected the correct invoices and that the customer
total matches the total received by the cashier from that
customer, they authorise the receipt allocation.
12 The computer records the cash receipt total
13,14 and changes the status of the selected invoices from ‘open’ The computer updates the status
to ‘closed’ (paid). The accounts receivable clerk does this (13) and displays the batch (14)
for every customer receipt on the report.
15,16 Once all the customer receipts have been entered, the The clerk inputs the completion
accounts receivable clerk updates the computer to record (15) and the batch status is
the cash receipts batch as complete. updated to complete (16)
17 The computer automatically prints out a report that
contains details of the cash receipts batch.
18 The accounts receivable clerk attaches the cash receipts
batch report to the customer receipts report
19 and files them away.

10.15 Prepare a context diagram for the recording payments process at AB Hi-Fi.
(LO4)
Cashier
(1)
Recording
payments
process
10.16 Prepare a process map for the recording payments process at AB Hi-Fi.
(LO4)
Record Payments – Credit facility customers

Cashier
Forwards
receipts report
Receivable clerk
Accounts
Creates batch & Authorise

Which Selects invoices Totals All receipts Updates batch Attaches report
enters customer receipt
Invoices? paid match? entered? to complete and files batch
data allocaiton
Function
Records total Prints cash

Retrieves opne
Calcualtes total and updates receipts batch
invoices
invoice status report

10.17 Prepare a level 0 logical DFD for the recording payments process at AB Hi-Fi.
(LO4)
Cashier
(1)
1.0
Input receipts (3)
(6)
Cash Receipts
(11)
Accounts
Receivable
(12)
2.0
(13) Update (16)
receipts
(19)
Receipts
reports
10.18 Prepare a physical DFD for the recording payments process at AB Hi-Fi.
(LO4)
Cashier
(1)
(19)
Accounts (2)
Receivable
Clerk
(4)
(5)
(12)
Receipts
reports
Cash Receipts
(7)
(8)
(10)
Computer (3)
(11)
(14) (16)
(15)
(13)
(6)
(17)
Accounts
Receivable

10.19 Prepare a systems flowchart for the recording payments process at AB Hi-Fi.
(LO4)
Accounts Receivable clerk Computer
Customer
Cashier (1) Receipts
Log in request
batch
Validate login
(2)
Create batch
Cash receipt
(4)
batch
Extract oipen
(5)
Customer number invoices
(3)
(6)
Open invoices (7)
(9)
Selected invoice
(8) Calculates total
Total invoices (10)

Accounts
Receivable
Check
total
(13)
Records total
(11) (12)
authorisation updates status
Cash Receipts
Receipts batch (14)
(15) Process batch (16)

Batch complete
Customer
Cash receipts
Receipts (17)
Print report
Attaches
(18)
Receipt
reports Customer
Receipts
(19) Cash receipts

10.20 Table 10.5 identifies three risks typically encountered when receiving and
processing a payment.
Required
(a) Analyse the degree of exposure to each of these risks for the recording
payments process at AB Hi-Fi.
present in the recording payments process at AB Hi-Fi.
risky you think the recording payments process is, and how
comprehensive the current internal controls are.
make to the recording payments process at AB Hi-Fi in order to reduce
their level of risk.
(LO5)
(a)
Risk Exposure
1 Late/slow/non-payment of Unable to assess from given section of narrative
accounts
2 Theft of cash and/or cheques Unable to assess – cash handling not included in narrative
section which addresses cash receipt allocation only
3 Incorrect recording of customer High – receipt allocation appears to be conducted without
accounts reference to a remittance advice, leaving the clerk unable to
accurately determine exactly which invoices are being paid.
(b)
Control Present?
Prompt invoicing, and setting suitable payment No – not applicable
terms
Regularly and consistently following up of No – not applicable
overdue accounts
Removing credit facilities for any non-payers No – not applicable
Minimising the cash handling points and the No – not applicable
numbers of people handling cash
Entering cash receipts close to where received Yes
Using lockboxes or safes and bank regularly No – not applicable
Immediate/prompt cheque endorsement and No – no evidence of this
immediate separation of remittance advice and
cheques
One-for-one checking of deposit slip and No – not applicable
cheques
Regular bank reconciliations by an independent No – not applicable
person
Limiting access to online banking No – not applicable
Creating batch or hash totals of cash receipts Yes
and reconciling inputs to accounts receivable
Issuing regular customer statements, No – not applicable
incorporating use of turnaround documents

(c) Recording payments does not have high risk; controls are comprehensive but could be
improved.
(d) One should recommend that risk would be reduced if accounts receivable clerk received a
detailed remittance advice instead of a report containing only the total amount paid by the
customer.
10.21 During the recording payments process at AB Hi-Fi the accounts receivable
clerk has to decide which open invoices to allocate the cash receipts amount
against. Take a moment to review this section of the narrative before you
complete the following questions.
Required
(a) What data does the accounts receivable clerk draw on when making the
decision?
(b) Where does the data you identified in part (a) come from?
(c) Is this data reliable, that is, is there any possibility that there could be
errors in the data?
(d) Is this data sufficient to make the decision, or can you identify additional
data that the clerk should consider when making the decision?
(e) What would be the consequences of an incorrect decision?
(LO3)
(a) Cashiers report identifying total paid by each customer.
(b) Cash receipts data input by the cashier.
(c) As only totals are included, and no reconciliation is evident to amounts banked or
customer remittance advices received, the data could be erroneous.
(d) Insufficient data is presented, a detailed list of exactly how much was remitted against
each invoice should be considered.
(e) Invoice status may be incorrectly updated to paid and paid invoices may be left as unpaid,
resulting in potential for confusion when next statement is issued to the customer.

10.22 Consider how you would measure performance of the recording payments
process at AB Hi-Fi; specifically:
(a) What metrics would you would use to measure performance?
(b) For each metric, explain where you would obtain the data required for
that metric.
(c) For each metric, explain why it is a good metric to help measure how well
the revenue cycle is meeting its objectives.
(LO6)
(a) The standard performance metrics of aged accounts receivable reporting, number of bad
debts written off and average payment times would not be helpful for this part of the payment
process as any errors potentially would reside at transaction level rather than customer level.
To measure performance of the recording payments process the best option would be to
monitor the level of customer complaints, or the number of correcting entries made to
customer accounts.
(b) Customer complaints could be logged via a help desk or hotline number; correcting
entries to accounts receivable accounts could be identified and reported by transaction type.
(c) Minimal customer complaints and adjustments mean that receipt allocation is performing
well in terms of accuracy and completeness.

The case narratives below for Yayy Online will be used to complete problems 10.23–
10.37. Make sure you read and understand the activities and the case thoroughly before
you commence work on the problems.
Yayy is a specialised online store that sells only one product each day. In addition to
selling only one product each day, Yayy offers the product of the day for sale until their
stock runs out, or until the end of the day, whichever comes first. Typical Yayy
products are inexpensive (generally between $15 and $50), and are mostly technology-
related gadgets.
The below will be used to complete Problems 10.23-10.27.

Problems 10.23 -10.27 diagram solutions are included below. In addition to the
diagrams a table is included that identifies and explains the flows depicted in the
various diagrams.
At midnight every day the product of

the day web content page is released
1
and the product is then available for
sale.
Customers browse the web site and if The product page is displayed for browsing (2)
23 they wish to purchase the product for and the customer clicks sell it button (3)
the day select a “sell it to me” button.
Once this button is clicked a login The computer needs to extract the login web page
45 file (4) before it can display it (5)
screen is presented.
Existing customers will key in their The solution shows the most frequent situation –
username and login, new customers are the customer is new to Yayy. The customer clicks
67
routed to a registration screen to input on the new button (6) a registration screen is
89
their name and address details and extracted (7) then displayed (8). the customer
10
create a login. Most customers are new keys in their details (9) they are saved to the
11
customer file (10) and then the product page is re-
to Yayy. presented (11)
After the customer has successfully
logged in, they type in the number of
12
products they want to purchase, and
select their preferred payment option.
Once the number of products required The sale is saved (13) before the total cost is
has been input and saved the total cost calculated and displayed (14)
13 of the order is calculated and displayed.
14 Yayy charges a flat rate for shipping
within Australia, which is added onto
the price of the product/s.
Yayy offers payment via credit card or The solution shows the most frequent situation –
PayPal; most customers choose to pay the customer pays via credit card. The customer
15 via credit card. After the customer keys inputs their card details (15) and then the
16 in their payment details the data are computer send the data to the bank for
sent to the bank (or PayPal) for verification (16)
verification

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Yea, he reproved kings for their sakes;
21. he reproved kings] Genesis xx. 3‒7.
²²Saying, Touch not mine anointed ones,
And do my prophets no harm.

22. my prophets] Genesis xx. 7.
23‒33 (= Psalms xcvi. 1‒13).
²³Sing unto the Lord, all the earth;
Shew forth his salvation from day to day.
²⁴Declare his glory among the nations,
His marvellous works among all the peoples.

23. Sing unto the Lord] In Psalms xcvi. 1, 2 this exhortation is
thrice repeated; in Chronicles it is once given. Note that verse 2a of
the Psalm is also omitted here.
²⁵For great is the Lord, and highly to be praised:
He also is to be feared above all gods.

25. to be feared above all gods] i.e. to be feared as being above
all “that are called gods,” these being “things of nought” (verse 26,
Revised Version margin). The real existence of false gods is not
assumed.
²⁶For all the gods of the peoples are idols ¹:
But the Lord made the heavens.
¹ Or, things of nought.
26. made the heavens] A fine epithet. Compare Jeremiah x. 11,

The gods that have not made the heavens ... shall perish from the
earth.
²⁷Honour and majesty are before him:
Strength and gladness are in his place.

27. are before him] i.e. are His, belong to Him as His attributes.
Perhaps also before him refers to God’s abode in heaven, while the
parallel expression in his place (Psalms xcvi. 6, in his sanctuary)
refers to His temple on earth.
Strength and gladness] Psalms xcvi. 6, Strength and beauty. The

reference seems to be to the strength and gladness (or beauty)
which God bestows on Israel (Psalms lxviii. 35; Isaiah lxi. 3).
in his place] Read with Psalms xcvi. 6, in his sanctuary.

Compare the two preceding notes.
²⁸Give unto the Lord, ye kindreds of the peoples,
Give unto the Lord glory and strength.

28. of the peoples] An expectation that the Gentiles will turn to
the worship of the true God is expressed not rarely in the Psalms;
compare Psalms xxii. 27, Psalms lxviii. 31, 32; and is, of course, one
of the greatest contributions of Old Testament faith to the religious
aspirations of humanity.
²⁹Give unto the Lord the glory due unto his name:
Bring an offering, and come before him:
Worship the Lord in the beauty ¹ of holiness.
¹ Or, in holy array.
29. before him] Psalms xcvi. 8, into his courts.
Worship the Lord in the beauty of holiness] Render as margin,

worship the Lord in holy attire (see Kirkpatrick on Psalms xxix. 2,
Psalms xcvi. 9; and compare Exodus xxviii. 2). Compare 2
Chronicles xx. 21.
³⁰Tremble before him, all the earth:
The world also is stablished that it cannot be moved.

30. The world also is stablished, that it cannot be moved] In
Psalms xcvi. 10 this clause is preceded by the words, Say among
the nations, The Lord reigneth, and is followed by the words, He
shall judge the peoples with equity.
³¹Let the heavens be glad, and let the earth rejoice;
And let them say among the nations, The Lord

reigneth.
³²Let the sea roar, and the fulness thereof;
Let the field exult, and all that is therein;

31. And let them say] Psalms xcvi. 10, Say [ye]. The clause is
displaced in Chronicles; compare note on verse 30.
The Lord reigneth] i.e. the Lord is claiming His kingdom over the
earth by coming to judge the earth; compare verse 33. Contrast
Habakkuk i. 14, where the prophet complains that Jehovah is not
asserting Himself as the ruler of men.
³³Then shall the trees of the wood sing for joy before
the Lord,
For he cometh to judge the earth.

33. to judge the earth] The joy with which the coming judgement
is greeted arises from the fact that the Hebrews regarded a judge as
a champion of the oppressed and not as a precise interpreter of
statutes.
34‒36 (= Psalms cvi. 1, 47, 48).
³⁴O give thanks unto the Lord; for he is good:
For his mercy endureth for ever.

34. his mercy endureth for ever] Compare Exodus xx. 6,
“shewing mercy unto a thousand generations of them that love me”
(Revised Version margin).
³⁵And say ye, Save us, O God of our salvation,

And gather us together and deliver us from the
nations,
To give thanks unto thy holy name,
And to triumph in thy praise.

35. gather us together] A phrase which shows very clearly that
the standpoint of the Psalmist is post-exilic.
³⁶Blessed be the Lord, the God of Israel,
From everlasting even to everlasting.
And all the people said, Amen, and praised

the Lord.
36. said, Amen, and praised the Lord] In the Psalms (cvi. 48)
“say, Amen! Hallelujah! (i.e. Praise ye the Lord!).” This verse belongs
not properly to the Psalm, but is the doxology marking the conclusion
of the fourth “book” of the Psalms. Apparently then the Psalms had
already been arranged in the five collections or “books,” into which
they were finally divided, by the time of the Chronicler; but the
argument is not conclusive since (1) the doxology may be really part
of the Psalm, and (2) there is the possibility that verses 7‒36 are a
later insertion in Chronicles.
37‒43.
The Service before the Ark and the Service at Gibeon.
The description of the disposition of the Priests and Levites for

the worship in Jerusalem and in Gibeon which was begun in verses
4‒6 is here resumed. verses 37, 38 summarise verses 4‒6.
³⁷So he left there, before the ark of the
covenant of the Lord, Asaph and his
brethren, to minister before the ark continually,
as every day’s work required: ³⁸and Obed-
edom with their brethren, threescore and
eight; Obed-edom also the son of Jeduthun
and Hosah to be doorkeepers:
38. Obed-edom with their brethren] A name or names seems to
be missing after Obed-edom. The LXX. cuts the knot by reading
simply “and his brethren.” Probably we should insert after Obed-
edom the words “and Hosah” from the last part of the verse: see the
following note.
Obed-edom also the son of Jeduthun] If the view of xv. 19‒21

and xvi. 5 taken above be correct, these words also may be deleted
as a harmonising gloss, added by someone who wished to insist on
Obed-edom as a singer, and hence gave him a place in the line of
Jeduthun, one of the three great choral guilds.
³⁹and Zadok. the priest, and his brethren the

priests, before the tabernacle of the Lord in
the high place that was at Gibeon,
39. Zadok the priest] As Zadok alone is here mentioned as
“before the tabernacle,” the Chronicler perhaps implies that Abiathar
(Ahimelech) the other high-priest was in charge of the Ark in
Jerusalem. On Zadok and Abiathar, see xv. 11, note.
the tabernacle of the Lord in the high place that was at Gibeon]
See prefatory note to chapter xiii.; and 2 Chronicles i. 3.
⁴⁰to offer burnt offerings unto the Lord upon

the altar of burnt offering continually morning
and evening, even according to all that is
written in the law of the Lord, which he
commanded unto Israel;
40. the altar of burnt offering] 2 Chronicles i. 5, 6.
morning and evening] Exodus xxix. 38, 39 (= Numbers xxviii. 3,

4).
⁴¹and with them Heman and Jeduthun, and the

rest that were chosen, who were expressed by
name, to give thanks to the Lord, because his
mercy endureth for ever;
41. Jeduthun] Psalms xxxix., lxii., lxxvii. (titles). In vi. 33‒47, xv.
17, 19 the names of the leading singers are given as Heman, Asaph,
and Ethan. Here and in xxv. 1 ff. however Jeduthun seems to take
the place of Ethan. Probably there was a variation in the tradition as
to the third name, two families competing each for the honour of its
own ancestor.
⁴²and with them Heman and Jeduthun with

trumpets and cymbals for those that should
sound aloud, and with instruments for the
songs of God: and the sons of Jeduthun to be
at the gate. ⁴³And all the people departed
every man to his house: and David returned to
bless his house.
42. and with them, etc.] The words with them are possibly
repeated in error from verse 41. Render perhaps, And Heman and
Jeduthun had trumpets and cymbals. For trumpets compare xv.
24 (note).
sons of Jeduthun] Perhaps a gloss connected with the statement
in verse 38, where see note on Obed-edom also the son of
Jeduthun.
to be at the gate] David’s organisation of the doorkeepers is

given in xxvi. 1‒19.
Chapter XVII.
1‒27 (= 2 Samuel vii. 1‒29).
God’s Answer to David’s expressed desire to build a Temple.
David’s Thanksgiving.
This passage is a reproduction with some omissions and

variations of 2 Samuel vii. The text is generally smoother in
Chronicles, and in some cases (e.g. in verse 6) we cannot doubt that
the Chronicler has preserved an older and better reading than the
present text of Samuel, whilst in other instances the Chronicler has
consciously emended his text of Samuel.
¹And it came to pass, when David dwelt in

his house, that David said to Nathan the
prophet, Lo, I dwell in an house of cedar, but
the ark of the covenant of the Lord dwelleth
under curtains.
1. in his house] Samuel adds, and the Lord had given him rest
from all his enemies round about. The Chronicler omits these words
probably because his next three chapters (xviii.‒xx.) are devoted to
wars (compare 2 Samuel viii. and x.).
Nathan] The prophet of the court in the reign of David: see e.g. 2
Samuel xii.; 1 Kings i.
the ark of the covenant] So called because it contained the two

tables of the covenant, 1 Kings viii. 9.
²And Nathan said unto David, Do all that is in

thine heart; for God is with thee.
2. in thine heart] The heart according to Hebrew thought is the
seat of intention and purpose.
³And it came to pass the same night, that the

word of God came to Nathan, saying, ⁴Go and
tell David my servant, Thus saith the Lord,
Thou shalt not build me an house to dwell in:
3. the same night] Genesis xx. 3; 1 Samuel iii. 2, 3; 1 Kings iii. 5;
Job iv. 12, 13.
⁵for I have not dwelt in an house since the day

that I brought up Israel, unto this day; but have
gone ¹ from tent to tent, and from one
tabernacle to another.
¹ Hebrew have been.
5. I brought up Israel] i.e. out of Egypt (so Samuel).
but have gone from tent to tent, and from one tabernacle to
another] Samuel but have walked in a tent and in a tabernacle. The
Hebrew text of Chronicles defies translation; that of Samuel is better.
⁶In all places wherein I have walked with all
Israel, spake I a word with any of the judges of
Israel, whom I commanded to feed my people,
saying, Why have ye not built me an house of
cedar?
6. the judges] A better reading than the tribes (Samuel).
⁷Now therefore thus shalt thou say unto my

servant David, Thus saith the Lord of hosts, I
took thee from the sheepcote ¹, from following
the sheep, that thou shouldest be prince ² over
my people Israel: ⁸and I have been with thee
whithersoever thou wentest, and have cut off
all thine enemies from before thee; and I will
make thee a name, like unto the name of the
great ones that are in the earth.
¹ Or, pasture. ² Or, leader.
7. sheepcote] Better as margin pasture.
⁹And I will appoint a place for my people

Israel, and will plant them, that they may dwell
in their own place, and be moved no more;
neither shall the children of wickedness waste
them any more, as at the first,
9. I will appoint, etc.] i.e. will establish them in Canaan with
complete ascendancy over their enemies.
waste them] Samuel afflict them.
¹⁰and as from the day that I commanded

judges to be over my people Israel; and I will ¹
subdue all thine enemies. Moreover I tell thee
that the Lord will build thee an house.
¹ Or, have subdued.
10. build thee an house] Samuel make thee an house, the house
meant being a dynasty, and not a building.
¹¹And it shall come to pass, when thy days be

fulfilled that thou must go to be with thy
fathers, that I will set up thy seed after thee,
which shall be of thy sons; and I will establish
his kingdom.
11. that thou must go to be with] Samuel and thou shalt sleep
with, the usual euphemism for “to die.”
¹²He shall build me an house, and I will

establish his throne for ever.
12. me an house] Samuel an house for my name.
¹³I will be his father, and he shall be my son:

and I will not take my mercy away from him,
as I took it from him that was before thee:
13. my son] Here Samuel adds, If he commit iniquity, I will
chasten him with the rod of men and with the stripes of the children
of men: this the Chronicler omits in order that not even a suggestion
of the coming evil days might at this stage rest on David and his line.
from him that was before thee] Samuel from Saul whom I put
away before thee. The reading in Chronicles is to be preferred.
¹⁴but I will settle him in mine house and in my

kingdom for ever: and his throne shall be
established for ever. ¹⁵According to all these
words, and according to all this vision, so did
Nathan speak unto David.
14. I will settle him in mine house and in my kingdom for ever]
Samuel And thine house and thy kingdom shall be established for
ever before thee (but read before me). The reading in Samuel is no
doubt the original. The change made in Chronicles neatly expresses
the Chronicler’s conviction that the kingdom of Israel was not a
human but a Divine institution, its true ruler being God Himself.
in mine house] Numbers xii. 7; compare 1 Timothy iii. 15.
¹⁶Then David the king went in, and sat

before the Lord; and he said, Who am I, O
Lord God, and what is my house, that thou
hast brought me thus far?
16. went in] i.e. into the tent which he had pitched for the Ark; xvi.
1.
sat before the Lord] So LXX. and 2 Samuel vii. 18. The Targum
rightly paraphrases, “and tarried in prayer before Jehovah.”
¹⁷And this was a small thing in thine eyes, O

God; but thou hast spoken of thy servant’s
house for a great while to come, and hast
regarded me according to the estate of a man
of high degree, O Lord God.
17. and hast regarded me according to the estate of a man of
high degree] In 2 Samuel vii. 19, and this too after the manner of
men, or rather and this is the law for men (an exclamation), but the
text both in Samuel and Chronicles is certainly corrupt. The Hebrew
phrase is not quite the same in the two passages, and there is
nothing in Samuel corresponding with the words of high degree, but
the text of Chronicles seems to be derived from that of Samuel An
emendation “and hast let me see the generations of men for ever,”
i.e. the fortunes of my distant descendants, has met with some
approval, but no really satisfactory translation or explanation has yet
been given of the Hebrew.
¹⁸What can David say yet more unto thee

concerning the honour which is done to thy
servant? for thou knowest thy servant.
18. concerning the honour which is done to thy servant] Again an
obscure text. Following Samuel we should probably omit these
words.
thou knowest] Approvest, acceptest; compare Psalms i. 6,

Psalms ci. 4; Jeremiah i. 5.
¹⁹O Lord, for thy servant’s sake, and

according to thine own heart, hast thou
wrought all this greatness, to make known all
these great things. ²⁰O Lord, there is none
like thee, neither is there any God beside
thee, according to all that we have heard with
our ears.
19. for thy servant’s sake] 2 Samuel vii. 21, for thy word’s sake,
but the LXX. of 2 Samuel agrees with the text of Chronicles.
²¹And ¹ what one nation in the earth is like thy

people Israel, whom God went to redeem unto
himself for a people, to make thee a name by
great and terrible things, in driving out nations
from before thy people, which thou
redeemedst out of Egypt? ²²For thy people
Israel didst thou make thine own people for
ever; and thou, Lord, becamest their God.
¹ Or, And who is like thy people Israel, a nation that is alone in
the earth &c.
21. what one nation in the earth is like thy people Israel] Better as
margin, who is like thy people Israel, a nation that is alone in the
earth. Compare Targum a people unique and chosen in the earth.
²³And now, O Lord, let the word that thou hast

spoken concerning thy servant, and
concerning his house, be established for ever,
and do as thou hast spoken.
23. be established] Literally be made Amen (i.e. “sure”).
²⁴And ¹ let thy name be established and

magnified for ever, saying, The Lord of hosts
is the God of Israel, even a God to Israel: and
the house of David thy servant is established
before thee.
¹ Or, Yea, let it be established, and let thy name be magnified
&c.
24. And let thy name ... magnified] Better, as margin, Yea, let it
be established, and let thy name be magnified.
even a God to Israel] delete as a dittography.
²⁵For thou, O my God, hast revealed to thy

servant that thou wilt build him an house:
therefore hath thy servant found in his heart to
pray before thee. ²⁶And now, O Lord, thou art
God, and hast promised this good thing unto
thy servant:
25. hath ... found ... to pray] i.e. hath found words and courage to
pray.
²⁷and now it hath pleased thee to bless the

house of thy servant, that it may continue for
ever before thee: for thou, O Lord, hast
blessed, and it is blessed for ever.
27. hast blessed, and it is blessed for ever] 2 Samuel vii. 29,
thou, O Lord God, hast spoken it; and with thy blessing let the house
of thy servant be blessed for ever.
Chapter XVIII.
1‒17 (= 2 Samuel viii. 1‒18).
A Summary of David’s Foreign Wars. David’s Officials.
This chapter like the last is taken from 2 Samuel with a few
omissions and variations. The Chronicler paraphrases (verses 1,
17), omits (verse 2), has a different reading (verses 4, 8, 10, 12). In
some cases the better reading is in Chronicles.
The campaigns (except perhaps that against Moab) seem to be

narrated in chronological order. David first makes sure of his most
pressing enemy the Philistines (verse 1); then feeling safe towards
the south-west he turns towards the north-east secure on the
Euphrates (but see note verse 3) a station (valuable for trade) held
by the Syrians of Zobah (verse 3); the Syrians of Damascus fearing
to be excluded from the River by David’s success come to the help
of their kinsmen (verse 5); lastly the Edomites, urged perhaps by the
Syrians to make a diversion in their favour and thinking it safe to
attack Judah during the absence of David, join in the war, but are
signally defeated by a detachment under Joab and Abishai (verse
12).
The war with Moab (verse 2) is surprising, if it took place at an

early date in David’s reign, for he seems to have been on specially
friendly terms with the king of Moab during his exile; compare 1
Samuel xxii. 3, 4 and Kirkpatrick on 2 Samuel viii. 2.
1‒13 (= 2 Samuel viii. 1‒14).

A Summary of David’s Foreign Wars.
¹And after this it came to pass, that David
smote the Philistines, and subdued them, and
took Gath and her towns out of the hand of the
Philistines.
1. after this] The phrase is adopted from 2 Samuel viii. 1 and
probably came originally from a still earlier book of annals, in which
the context may have been different. We cannot therefore say at
what period of David’s reign the conquest of Gath took place.
took Gath and her towns] It is impossible to say for certain

whether this is the original text or only an interpretation of the
obscure reading in 2 Samuel viii. 1, took the bridle of the mother city
(Revised Version).
²And he smote Moab; and the Moabites

became servants to David, and brought
presents.
2. smote Moab] The Chronicler at this point omits, as he often
omits, some difficult words of Samuel. 2 Samuel viii. 2 seems to say
that David put two-thirds of the Moabites (presumably the warriors)
to death, but the meaning of the verse is uncertain.
brought presents] i.e. tribute, in acknowledgment of David’s

superiority. The same Hebrew phrase (translated “bring an offering”)
is used Psalms xcvi. 8 of sacrificing to Jehovah.
³And David smote Hadarezer king of Zobah

unto ¹ Hamath, as he went to stablish his
dominion by the river Euphrates.
¹ Or, by.
3. Hadarezer] So spelt in 2 Samuel x. 16‒19, but in 2 Samuel viii.
3‒12, Hadadezer, the right form (as inscriptions show).
Zobah unto Hamath] Render as margin Zobah by Hamath, the

position of Zobah being fixed by the note that it was near Hamath.
Hamath] The modern Hama on the Orontes, midway between

Antioch and Damascus, but somewhat further to the east than either.
See below verse 9; also xiii. 5 and 2 Chronicles viii. 3.
as he went to stablish his dominion] He may refer to Hadarezer

or to David; the latter, probably, is the Chronicler’s intention. The
reading in 2 Samuel viii. 3 (“to recover his dominion”—Revised
Version) should be emended to the text in Chronicles.
by the river Euphrates] The utter improbability that David

exercised any authority in regions so far north throws no doubt upon
the reading, for the Chronicler and the author of Samuel may easily
have believed that he did so.
⁴And David took from him a thousand chariots,

and seven thousand horsemen, and twenty
thousand footmen: and David houghed all the
chariot horses, but reserved of them for an
hundred chariots.
4. a thousand chariots, and seven thousand horsemen] Samuel a
thousand and seven hundred horsemen (so Hebrew but LXX. of
Samuel agrees with Chronicles). Houghed = “hamstrung.”
⁵And when the Syrians ¹ of Damascus ² came to

succour Hadarezer king of Zobah, David
smote of the Syrians ¹ two and twenty
thousand men.
¹ Hebrew Aram. ² Hebrew Darmesek.
5. Damascus] The name is variously written in Hebrew,

Darmesek (Chronicles), Dammesek (Genesis, 1 Kings), Dummesek
(2 Kings xvi. 10). See G. A. Smith, Damascus in Encyclopedia Biblia.
came to succour] By interposing between David and his own land

and so threatening his rear.
⁶Then David put garrisons in Syria ¹ of

Damascus ²; and the Syrians ¹ became servants
to David, and brought presents. And the Lord
gave victory ³ to David whithersoever he went.
¹ Hebrew Aram. ² Hebrew Darmesek.
³ Or, saved David.
6. put garrisons in Syria of Damascus] margin in Aram of

Darmesek, i.e. in the Aramean kingdom of which Damascus was the
capital. David’s purpose of course was to secure his rear in any
future operations towards Hamath or towards the Euphrates.
⁷And David took the shields of gold that were

on the servants of Hadarezer, and brought
them to Jerusalem.
7. shields of gold] “shields” = Hebrew shĕlātim. The meaning of
the Hebrew word is doubtful; most probably it does not mean
“shield,” for (1) a shield would not be described as “upon” the person
to whom it belonged, (2) the early authorities, i.e. the LXX.
translators, the Targum, and the Peshitṭa (on 2 Samuel viii. 7; 2
Kings xi. 10; Jeremiah li. 11; Ezekiel xxvii. 11) never give “shield,” but
either leave the word untranslated or give various conjectural
renderings. A later authority (Targum on 1 Chronicles xviii. 7; 2
Chronicles xxiii. 9) gives “shield,” while LXX. gives “collars” (κλοιούς)
here, and “arms” or “shields” (τὰ ὅπλα) in 2 Chronicles.
The most probable rendering of the word is “suits of armour” (see

Barnes, Expository Times, x. 43 ff.).
and brought them to Jerusalem] So Hebrew LXX. Targum, but the

Peshitṭa (all important MSS.) omits the words, and they may be a
gloss introduced from 2 Samuel viii. 7.
⁸And from Tibhath and from Cun, cities of

Hadarezer, David took very much brass,
wherewith Solomon made the brasen sea, and
the pillars, and the vessels of brass.
8. Tibhath] compare Tebah, the name of an Aramean family,
Genesis xxii. 24. Nothing is known certainly of the position of the city.
In 2 Samuel viii. 8 Betah (= Tebah).
Cun] 2 Samuel viii. 8, “Berothai.” Nothing is certainly known of a

city of either name; but “Berothai” may be the same as “Berothah”
(Ezekiel xlvii. 16).
very much brass] Compare xxi. 14, xxix. 2.
brass] Not the metal generally so called. Revised Version (margin

note to Genesis iv. 22) gives copper as an alternative rendering. The
“brass” of the ancients (χαλκός, LXX.) corresponds rather to bronze.
the brasen sea, etc.] Compare 2 Chronicles iv. 11‒18.
⁹And when Tou king of Hamath heard that

David had smitten all the host of Hadarezer
king of Zobah,

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Edition Parkes Solutions Manual

Parkes, Olesen and Blount

© John Wiley & Sons Australia, Ltd 2017

Chapter 10: Transaction cycle – the revenue cycle

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© John Wiley and Sons Australia, Ltd 2017 10. 2

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Sub-process 1.0 processing the sales order

(Questions 10.1, 10.2, 10.3a, 10.4a, 10.5a)

Flow Narrative Comments

© John Wiley and Sons Australia, Ltd 2017 10. 7

Sub-process 2.0 picking packing and shipping the goods

(Questions 10.1, 10.2, 10.3b, 10.4b, 10.5b)

Flow Narrative Comments

© John Wiley and Sons Australia, Ltd 2017 10. 8

Sub-process 3.0 billing the customer

(Questions 10.1, 10.2, 10.3c, 10.4c, 10.5c)

Flow Narrative Comments

Sub-process 4.0 receiving and recording payment

(Questions 10.1, 10.2, 10.3d, 10.4d, 10.5d)

Flow Narrative Comments

© John Wiley and Sons Australia, Ltd 2017 10. 9

10.1 Prepare a context diagram for the revenue process at AB Hi-Fi.

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10.3 Prepare a process map for:

1.0 Process the sales order

Creates and Creates and At 11pm

2.0 Picking packing & Shipping goods

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3.0 Billing the customer

Prints credit Credit Marks invalid

4.0 Receiving & Recording payment

and sends email

Inputs total cash

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10.4 Prepare a level 1 logical DFD for:

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10.5 Prepare a physical DFD for:

© John Wiley and Sons Australia, Ltd 2017 10. 17

(2.3) Sales Order

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© John Wiley and Sons Australia, Ltd 2017 10. 19

10.6 Prepare a systems flowchart for:

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© John Wiley and Sons Australia, Ltd 2017 10. 21

Warehouse Clerk Computer Shipping Clerk

Processing the Picking Ticket

Picking Ticket (2.7)

Checks Error routine not

Delivery slip Picking Ticket

Picking Ticket Attaches

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Accounts Receivable clerk Computer

Print credit status

© John Wiley and Sons Australia, Ltd 2017 10. 23

Accounts Receivable Clerk Computer