Accounting Information System – Revenue and Expenditure Cycle

Posted: November 30th, 2013

Accounting Information System – Revenue and Expenditure Cycle

Revenue cycle

Sales order entry

1. Is there sufficient inventory to fill the order, and has a back order been created because of insufficient inventory?

Yes                      No

The answer No represents a control weakness. The business suffers a disadvantage of not having enough inventories that will enable them to respond to the customer’s orders. A back order enables the business to make more orders for inventories. This increases their stock that in turn enables them to make more sales orders (Davis, & American Health Information Management Association, 2011).

Shipping

2. Does the inventory number tally with the amounts indicated in the picking ticket and the sales order sent from the sales order entry?

Yes                        No

The answer No represents a control weakness in the shipping functions. The business exposes itself to a risk of shipping wrong inventory quantity. This is because the inventories shipped will not be equal to the quantities indicated in the picking ticket. In addition, the business may lose some of its inventories to theft or fraud since the right quantity has not been specified.

Billing

3. Are the invoices available, and are the accounts receivables updated?

Yes                        No

The answer No represents a control weakness. The customers will not know how much they should pay for the orders. They will also fail to know where to send their payments provided the sales invoice is not created. The customers’ accounts will not be debited in case the invoice is not prepared. Therefore, this will prevent the accounts receivables from being updated. In updating the accounts receivables, the invoice information is used to debit the customers’ accounts for the credit purchases

Cash collections

4. Does the cashier have a remittance list?

Yes                        No

The answer No represents a weakness. In this case, the chances of errors and frauds occurring are high. The remittance list contains the names and amounts of the customers’ remittances; thus this enables accurate record keeping. Lack of this paves way to possible theft of the company’s assets. The remittance list can also act as evidence in case of problems in record keeping (Orvis & HCPro, 2006).

Expenditure cycle

Ordering goods

1. Are the clerks in charge of the departments to be consulted before ordering goods, and are the amounts specified?

Yes                        No

The answer No represents a weakness. Failure to specify the amounts needed may lead to recording inaccurate data. This may also cause the purchase of unnecessary inventory. The company may purchase the inventory at inflated prices if the clerks are not consulted. In addition, low quality goods may be purchased from unauthorized suppliers. The clerks in charge of the ordering department should always consent to the orders made.

Receiving

2. Are the receiving employees notified on the inventory to be received, and do they sign the receiving reports?

Yes                        No

The answer No represents a weakness since the business exposes itself to a risk of accepting inventory not ordered. Failure to sign in the inventory may lead to this. Not notifying the employees on the inventories to be received may cause the company to receive fewer inventories. In addition, a wrong count of inventories and even theft of the received inventory may occur (Considine, 2010).

Approving supplier invoices

3. Are detailed receipts for procurement and card purchases offered, and has the master data access been restricted?

Yes                        No

The answer No represents a weakness. It exposes the supplier invoice to multiple errors. In addition, the accounts payable may also be inaccurate. This affects the general transaction records and in turn the general business records. The employees may tamper with the data upon failure of imposing restriction on the master data access.

Cash disbursements

4. Do all the suppliers’ invoices tally with the supporting documents, and have the cash flow budgets been prepared?

Yes                        No

The answer No represents a weakness of possible cash flow problems. The company may also pay for items not received. The assets may be at risk of theft from employees and outsiders, and duplicate payments may be made (Bagranoff, Simkin, Norman, & Moscove, 2005).

References

Bagranoff, N. A., Simkin, M. G., Norman, C. S., & Moscove, S. A. (2005). Core concepts of accounting information systems. Hoboken, NJ: Wiley.

Considine, B. (2010). Accounting information systems: Understanding business processes. Milton, Qld: John Wiley & Sons.

Davis, N. A., & American Health Information Management Association. (2011). Revenue cycle management best practices. Chicago, Ill: AHIMA Press.

Orvis, S. G., & HCPro (Firm). (2006). Revenue cycle management: A best practices toolkit. Marblehead, MA: HCPro.

Romney, M. B., & Steinbart, P. J. (2006). Accounting information systems. Upper Saddle River, N.J: Pearson Prentice Hall.