Accounting Information Systems: The Processes and Controls, 2nd Edition

INTRODUCTION TO REVENUE PROCESSES (STUDY OBJECTIVE 1)

There are many kinds of companies selling many kinds of products and services. Because there is such a variety of types of companies and items for sale, and because there are so many methods of conducting revenue transactions, it is impossible to present an example of revenue and collection business processes that represents all possibilities. For instance, retailers may sell their products to consumers through company-owned department stores, using cash registers with bar coding systems called point of sale (POS) systems. These systems record the sale, collect cash, and update the inventory status all at the time of the sale. On the other hand, a manufacturer may sell products to other companies on 30-day credit terms, deliver the goods and bill the customer at a later date, and collect payment after the 30-day period.

The business processes for a company selling to other companies are likely to be different from a company selling products to consumers. An example of a company that sells to end consumers is Walmart, while an example of a company that sells to other companies is Procter & Gamble (P&G). P&G sells consumer products, such as Crest^® toothpaste, to companies (like Walmart) who then resell to consumers. Walmart serves as the middle man who buys toothpaste from P&G and resells to consumers. The business processes that Walmart engages in to generate and collect revenue are much different from those of P&G. This chapter ...