The Revenue

Cycle
-direct exchange of finished goods
or services for cash in a single
transaction between a seller and a
buyer.
Two (2) phase of Revenue Transaction
• Physical Phase - involving the transfer of assets or services
from the seller to the buyer.
• Financial Phase - involving the receipt of cash by the seller
in payment of the account receivable.

Two (2) subsystems of Revenue Cycle

• Sales Order Processing
• Cash Receipt
Sales Order Procedures
-include the task involved in receiving and
processing a customer order, filling the
order and shipping products to the
customer, billing the customer at the proper
time, and correctly accounting for the
transaction. The relationship between these
tasks are presented with DFD in Figure 4.1
and described in the following section.
• Receive Order - sales process begns with
the receipt of customer order including
the type and quantity merchandise
desired.
• Check credit - before processing the
order further, the customer’s
creditworthiness needs to established.
The circumstances of the sale will
determine the nature of degree of the
credit check.
• Pick Goods - receive order activity
forwards the stock release document
(also called the picking ticket) to the pick
goods function, in the warehouse. This
document indentifies the items of
inventory that must be located and
picked from the warehouse shelves.
• Ship Goods - before the arrival of
the goods and the verified stock
release document, the shipping
department receives the packing
slip and shipping notice from the
receive order function. The
packing slip will ultimately travel
with the goods to the customer
to describe the contents of the
order. The ship ping notice will
later be forwarded to the billing
function as evidence that the
customer's order was filled and
shipped.
• Bill Customer - the shipment of
goods mark the completion of the
economic events and point at which
the customer should be billed.
When the customer order is
originally prepared, some details
such as inventory, availability,prices
and shipping charges may not be
known certainty. Sales Journal- is a
special Journal used for recording
completed sales transaction.
• UPDATE INVENTORY
RECORDS - The inventory
control function updates
inventory subsidiary ledger
accounts from information
contained the stock release
document.
• In a perpetual inventory
system, every inventory item
has its own record in the
ledger containing, at a
minimum, the data depicted
in figure 4-5.
• UPDATE ACCOUNTS RECEIVABLE -
Customer records in the accounts
receivable (AR) subsidiary ledger are
updated from information the sales
order (ledger copy) provides. Every
customer has an account record in
the AR subsidiary ledger containing,
at minimum, the following data:
customer name: customer address,
current balance, available credit;
transaction dates invoice numbers
and credits for payments, retums, and
allowances. Figure 4-6 presents an
example of an AR subsidiary ledger
record.
• Post to general Ledger - the
close of the transaction
processing period the general
ledger function has received
journal vouchers from the
billing and inventory control
tasks control tasks and an
account summary from the
AR function.