Key Words

• Revenue Cycle – is the recurring set of business processing operations that are
associated with providing goods and services to customers and cash collected
from receivables of those sales
• Sales Order – is a document created during sales order entry listing the item
numbers, quantities, prices, and terms of the sale
• Credit Limit – the maximum allowable credit account balance for each
customer, based on past credit history and ability to pay
• Back Order – is a document authorizing the purchase or production of items
that are created if there is insufficient inventory and meet customer orders
• Picking Ticket – is a document that lists the items and quantities ordered. It also
authorizes the inventory control function to release that merchandise to the
shipping department
 Key Words
• Packing Slip – is a document listing the quantity and description of each item
included in a shipment
• Sales Invoice – is a document notifying customers of the amount of a sale and
where to send payment
• Bill of Lading – is a contract that shows responsibility for goods while they are in
transit
• Remittance Advice – is a copy of the sales invoice returned together with the
customer’s payment. It also indicates the invoices, statements, or other items
being paid
• Monthly Statement – is a document listing all transactions that occurred during
the past month and informing customers of their current account balance
 Key Words
• Credit Memo – is a document approved by the credit manager,
authorizing the billing department to credit a customer’s account
• Remittance List – is a document list of names and amounts of all
customer payments received in the mail
• Lockbox – is a postal address of which customers send their remittances
• Electronic Lockbox – a lockbox arrangement in which the bank
electronically sends the company information of the customer account
number and the amount remitted as soon as it receives payments
Revenue Cycle

• Economic enterprises, both for profit and not-for-

profit, generate revenues through business
processes that constitute their revenue cycle
• Customers are the primary external exchange of
information
• Information about revenue cycle activities flows to
the other accounting cycles
Revenue Cycle
• The basic objective of the revenue cycle is to
provide the right product, place, and time for the
right price.
• Information on revenue cycle activities flows to the
other accounting cycles, e.g., the expenditure and
production cycles, the human resources/payroll
cycle, and the general ledger and reporting
function
Four Basic Revenue Cycle Activities

•Sales Order Entry

•Shipping
•Billing/Invoicing
•Cash Collections
Sales Order Entry

• The revenue cycle begins with the receipt of orders

from customers
• Typically, the sales department performs the sales
order entry process
• Still, increasingly customers are themselves
entering much of this data through forms on a
company’s Website storefront
Sales Order Entry

•The sales order entry process includes the

following steps:
• Take the customer’s order
• Check the customer’s credit
• Check inventory availability
• Respond to customer inquiries (may be done by
customer service or sales order entry)
Shipping

•Shipping is the second basic activity in the

revenue cycle.
•It is represented with two steps:
•Picking and packing the order; and
•Shipping the order
Shipping

•Usually, the warehouse and shipping

departments are responsible for
performing these activities
•Both functions include custody of
inventory and report ultimately to the vice
president of manufacturing
Billing/Invoicing and Cash Collections

• Accurate and timely billing for shipped

merchandise is crucial.
• The invoicing activity summarizes information from
the sales order entry to the shipping activities.
• It needs information from the shipping
department on the identification of the items and
quantities shipped
Billing/Invoicing and Cash Collections

•It also requires information about prices

and any special sales terms from the sales
department
•The final step in the revenue cycle is
collecting and processing payments from
customers