Kế toán, kiểm toán - Chapter 10: Marketing/sales / collection/customer support process: recording and evaluating revenue process activities

Chapter 10Marketing/Sales/Collection/Customer Support Process: Recording and Evaluating Revenue Process ActivitiesCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin10-*What are the Primary Activities in the Revenue Process?Determine marketing and distribution channelsReceive and accept ordersDeliver goods/servicesReceive payment from customersProvide customer support10-*Which of the Revenue Process Activities are Accounting Events?Deliver goods/servicesIncrease sales revenueIncrease accounts receivableIncrease cost of goods soldDecrease inventoryReceive payment from customersIncrease cashDecrease accounts receivableProvide customer supportVarious effects, depending on the support provided, see Chapter 8 for employee events10-*What is the Basic Flow of Information in the Revenue Process?Customer places an order and credit manager approves creditWarehouse releases goods and notifies shippingShipping prepares shipping documents and ships the goods to the customerBilling prepares the sales invoice based on the sales order and the shipping noticeInventory, accounts receivable, and sales records are updated10-*Information Flow ContinuedThe mail room receives payment and remittance advice from customers and prepares a remittance listRemittance list is used to update cash receipts and accounts receivable recordsThe checks are deposited in the bank.10-*When are Revenues Recognized?When earned, regardless of when cash is received. Assume a December 31 year-end for the following examples.Example #1—provided services in November, send out bills in December, recognize revenue in ? NovemberExample #2—received payment in November for services to be provided in December, recognize revenue in ?December, if services are providedExample #3—provided services and received payment in November, recognize revenue in ?November10-*What are the Accounts Used in the Revenue Process?Sales—gross amount of revenue earnedSales returns and allowances (contra revenue)—gross amount of allowance given to customer for a return or sales allowanceSales discount (contra revenue)—discount granted to customers who pay within the discount period10-*Thought QuestionsWhy not simply credit sales for the return?Management needs a record of returns to evaluate quality and customer serviceWhy not simply credit sales for the discount or record sales net-of-the discount?Management needs a record of discounts taken to evaluate credit policies and customer service.10-*What is a Cost Flow Assumption?A method used to assign a cost to a product when it is not specifically identified with a cost.FIFO—first-in, first-outAssumes that the first costs recorded are the first costs expensedLIFO—last-in, first-outAssumes that the last costs recorded are the first costs expensed10-*So FIFO is good because it Reduces Costs?No, for 2 reasonsFirst, the difference in cost of goods sold between FIFO and LIFO ($7) results in a difference in ending inventory, not a permanent difference in cost. Ending inventory under FIFO is $42 (7 * $6) while ending inventory under LIFO is $35 (7 * $5)Second, in a period of rising prices (as this example shows) a company using LIFO will incur less tax expense because costs are higher10-*Why is it Necessary to Estimate Uncollectible Accounts?Proper matching of revenue and expense—the cost incurred in an attempt to generate revenue is the possibility of not collecting the monies due from customersAsset definition—accounts receivable should reflect the amount we believe we can collect, amounts which are deemed uncollectible have no future benefit10-*How are Revenue Process Activities Communicated to Users?Income statementNet sales, uncollectible accounts expense, miscellaneous revenuesBalance sheetAccounts receivable (net), related liabilities (unearned revenue), related assets (inventory)Statement of cash flowsCash received from customers10-*How can we Estimate Cash Received from Customers?Beginning accounts receivable (balance sheet)+ Net sales on account (income statement)= Maximum amount owed by customersCash received from customers (calculated)Write-offs (if known)= Ending accounts receivable (balance sheet)10-*What are Revenue Variances?Actual revenues less planned (budgeted) revenuesSales price variance(ASP – SSP) * AQTells us whether our selling price is greater than or less than expectedSales quantity variance(AQ – SQ) * SSPTells us whether we sold more or fewer products than anticipated (budgeted)