BUSACT702 · Accounting Information Systems
The Revenue (Sales) Cycle
The revenue cycle is the first full transaction cycle in University of Auckland BUSACT 702: order, deliver, bill, collect. You learn the activities in sequence, the risk at each step and the internal control that addresses it, worked through both a flowchart and an activity -> risk -> control table. Metro-supermarket and Porcelain-style cases are the standard vehicles, and either the flowchart or the control critique can appear on the secure test.
What this chapter covers
- 01The activities in sequence: 1.1 check inventory levels -> 1.2 credit check -> 1.3 create sales order -> 2.1 pick the goods -> 2.2 prepare for shipping -> 2.3 deliver the goods
- 02Selling unavailable goods -> perpetual inventory records plus physical checks
- 03Selling to customers who won't pay -> independent credit limits, pre-billing, accounts-receivable ageing
- 04Fictitious sales -> a signed/authorised order before goods move
- 05Goods not picked / picking errors -> sequentially numbered picking tickets and exception reports
- 06Theft in transit and on delivery -> secure conveyance, restricted access, valid customer signature per delivery
- 07Goods mislabelled -> independent check of goods against the picking ticket and shipping label
- 08Where it shows up: an e-commerce fulfilment flowchart (web order -> warehouse scan -> delivery confirm) or a sales-cycle control critique
Risk and control across the sales cycle
- +1Credit check. Risk: selling to a customer who cannot or will not pay, creating a bad debt. Control: an independent credit limit checked before the order is confirmed, plus accounts-receivable ageing and pre-billing for higher-risk accounts.
- +1Picking the goods. Risk: goods not picked, or the wrong goods picked, so the customer is short-shipped. Control: sequentially numbered picking tickets with exception reports for unfilled tickets, and an independent check of the goods against the picking ticket.
- +1Delivery. Risk: theft on delivery or a dispute over receipt. Control: require a valid customer signature for each delivery (proof of receipt) and use secure, access-restricted conveyance.
Key terms
- Revenue (sales) cycle
- The transaction cycle covering taking the order, delivering the goods, billing the customer and collecting cash — with a characteristic set of risks and controls at each step.
- Credit check / credit limit
- A preventive control applied before confirming a sale, verifying the customer is within an independently set credit limit to avoid selling to non-paying customers.
- Picking ticket
- The document authorising and guiding the picking of goods for an order; sequential numbering plus exception reporting ensures every ticket is filled and none is lost.
- Accounts-receivable ageing
- A detective control listing outstanding receivables by how overdue they are, so slow-paying or high-risk accounts are followed up before they become bad debts.
- Proof of delivery
- Evidence (typically a valid customer signature per delivery) that goods reached the customer, controlling theft in transit and disputes over receipt.
- Perpetual inventory
- Continuously updated inventory records that, with periodic physical checks, prevent selling goods that are not actually available.
The Revenue (Sales) Cycle FAQ
What are the steps of the revenue cycle?
Check inventory, credit-check the customer, create the sales order, pick the goods, prepare for shipping and deliver — then bill and collect. Each step carries its own risk and control.
What are the highest-value controls in the sales cycle?
Independent credit limits (against selling to non-payers), sequentially numbered picking tickets with exception reports (against un-picked or mis-picked orders), an independent goods-to-ticket check (against mislabelling), and proof-of-delivery signatures (against theft and disputes).
How might the revenue cycle appear on the secure test?
Either as a flowchart to draw from a sales/fulfilment narrative (web order -> warehouse pick/scan -> delivery confirm) or as a control critique — identify the risks and recommend controls in an activity -> risk -> control table. Confirm the emphasis for your quarter on Canvas.
Can Sia quiz me on sales-cycle controls?
Yes — Sia can present a narrative and drill the risk-and-control table with you, checking that each control actually addresses the stated risk. It is a study aid and does not do graded work for you.
Exam move
Learn the activity sequence cold, then attach the signature risk and control to each step so you can produce the table fast. Practise both modes the test can use: draw a fulfilment flowchart from a narrative, and critique a sales cycle for weaknesses. Reuse the recurring controls from the internal-controls chapter but always tie the control to the specific sales-cycle risk. Confirm the assessed cases and depth on Canvas.
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