D217 - Unit 3 Revenue Cycle Exam | Questions
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Terms in this set (28)
Economic enterprises, both for-profit economic enterprises, both for-profit and not-for-
and not-for-profit, generate profit, generate revenues through business
revenues through business processes processes that constitute their revenue cycle. In its
that constitute their revenue cycle. In simplest form, the revenue cycle is the direct
its simplest form, the revenue cycle is exchange of finished goods or services for cash in
the direct exchange of finished a single transaction between a seller and a buyer.
goods or services for cash in a single
transaction between a seller and a
buyer.
This time lag splits the revenue (1)
transaction into two phases: 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 accounts receivable.
revenue cycle actually consists of (1)
two major subsystems: the sales order processing subsystem and
(2)
the cash receipts subsystem.
,Steps of Revenue Cycle Activities 1 Receive order
(Receive, create order credit check) Create sales order
Check Credit (receive order task sends the sales
order (credit copy) to the check credit task for
approval. The returned approved sales order then
triggers the continuation of the sales process by
releasing sales order)
, Steps of Revenue Cycle Activities 2 The receive order activity forwards the stock
(Pick Goods) release document (also called the picking ticket)
to the pick goods function in the warehouse. This
document identifies the items of inventory that
must be located and picked from the warehouse
shelves. It also provides formal authorization for
warehouse personnel to release the specified
items. After picking the stock, the order is verified
for accuracy and the goods, along with the
verified stock release document, are sent to the
ship goods task. If inventory levels are insufficient
to fill the order, a warehouse employee adjusts the
verified stock release to reflect the amount actually
going to the customer. The employee then
prepares a back-order record, which stays on file
until the inventories arrive from the supplier (not
shown in Figure 4-1). Back-ordered items are
shipped before new sales are processed.
Finally, the warehouse employee adjusts the stock
records to reflect the reduction in inventory. These
stock records are not the formal accounting
records for controlling inventory assets. They are
used for warehouse management purposes only.
Assigning asset custody and record-keeping to the
warehouse clerk would violate a key principle of
internal control. The inventory control function,
discussed later, maintains the formal accounting
inventory records.
and Answers | Verified Solutions | 2026 Edition |
Pass Guaranteed
Save
Terms in this set (28)
Economic enterprises, both for-profit economic enterprises, both for-profit and not-for-
and not-for-profit, generate profit, generate revenues through business
revenues through business processes processes that constitute their revenue cycle. In its
that constitute their revenue cycle. In simplest form, the revenue cycle is the direct
its simplest form, the revenue cycle is exchange of finished goods or services for cash in
the direct exchange of finished a single transaction between a seller and a buyer.
goods or services for cash in a single
transaction between a seller and a
buyer.
This time lag splits the revenue (1)
transaction into two phases: 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 accounts receivable.
revenue cycle actually consists of (1)
two major subsystems: the sales order processing subsystem and
(2)
the cash receipts subsystem.
,Steps of Revenue Cycle Activities 1 Receive order
(Receive, create order credit check) Create sales order
Check Credit (receive order task sends the sales
order (credit copy) to the check credit task for
approval. The returned approved sales order then
triggers the continuation of the sales process by
releasing sales order)
, Steps of Revenue Cycle Activities 2 The receive order activity forwards the stock
(Pick Goods) release document (also called the picking ticket)
to the pick goods function in the warehouse. This
document identifies the items of inventory that
must be located and picked from the warehouse
shelves. It also provides formal authorization for
warehouse personnel to release the specified
items. After picking the stock, the order is verified
for accuracy and the goods, along with the
verified stock release document, are sent to the
ship goods task. If inventory levels are insufficient
to fill the order, a warehouse employee adjusts the
verified stock release to reflect the amount actually
going to the customer. The employee then
prepares a back-order record, which stays on file
until the inventories arrive from the supplier (not
shown in Figure 4-1). Back-ordered items are
shipped before new sales are processed.
Finally, the warehouse employee adjusts the stock
records to reflect the reduction in inventory. These
stock records are not the formal accounting
records for controlling inventory assets. They are
used for warehouse management purposes only.
Assigning asset custody and record-keeping to the
warehouse clerk would violate a key principle of
internal control. The inventory control function,
discussed later, maintains the formal accounting
inventory records.
