The document discusses the sales/collection process and its accounting information system elements. It begins by outlining the learning objectives and describing Porter's value chain model, which identifies primary and support activities. The document then lists the seven generic steps in the sales/collection process and explains how the process inputs, processes, outputs, storage, and internal controls apply the generic AIS elements.

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Chapter 12
Sales/Collection Process

2. 12-2
Outline
• Learning objectives
• Value chain
• Process steps
• AIS elements

3. 12-3
Learning
objectives
1. Explain its role and purpose.
2. List and discuss, in order, the
steps in the process.
3. Explain how the generic
structure of most AIS applies
to the process.
4. Process common
transactions.
5. Design & critique internal
controls based on common
risk exposures.
6. Develop & interpret process-
related systems
documentation.
7. Relate Porter’s value chain to
the process.
With respect to
the sales /
collection
process, you
should be able to:

4. 12-4
Value chain
• Organizations exist to create value for
their stakeholders.
• Porter’s value chain is a classic, well
recognized model for describing generic
value creating activities.
• It comprises two main parts:
– Primary activities
– Support activities

5. 12-5
Value chain
• Primary activities create value directly.
– Inbound logistics
– Operations
– Outbound logistics
– Marketing and sales
– Service

6. 12-6
Value chain
• Support activities create value
indirectly.
– Procurement
– Information technology
– Human resource management
– Infrastructure

7. 12-7
Process steps
• Overall, the sales /
collection process
comprises everything
from taking a
customer’s order
through collecting
payment from the
customer.
• Details may vary across
organizations, but the
sales / collection
process generally
comprises seven
generic steps.

8. 12-8
Process steps
1. Take the customer’s
order.
2. Approve the
customer’s credit.
3. Fill the order based on
approved credit.
4. Ship the product.
5. Bill the customer.
6. Collect payment.
7. Process uncollectible
receivables as
needed.

9. 12-9
AIS
elements
• Inputs
• Processes
• Outputs
• Storage
• Internal controls
Recall from your study in
Chapter 1 that most
accounting information
systems comprise five
generic elements. The
next series of slides will
show how those
elements are applied in
the context of the sales /
collection process.

10. 12-10
AIS
elements
• Customer order
• Picking list
• Packing list
• Bill of lading
• Customer invoice
• Customer check
• Remittance advice
• Deposit slip
Input and output
documents
associated with the
sales / collection
process include
those listed on the
right.

11. 12-11
AIS elements
• Processes
– Seven generic steps
– Accounting cycle steps, including the
following journal entries:
• Sale on credit / for cash
• Payment of outgoing freight charges
• Cash collections
• Bad debt write-offs as needed

12. 12-12
AIS
elements
• Master files
– Customer
– Inventory
– Employee
– Cash
• Transaction files
– Sales
– Cash receipts
• Junction files
– Sales / inventory
– Sales / cash receipts
Storage
• Three broad file
types
• Master files
• Transaction files
• Junction files
• Examples for the
sales / collection
process are listed
on the right.

13. 12-13
AIS elements
• Internal controls
– Segregation of duties
– Adequate
documentation
– Insurance
– Proper inventory
storage
– Employee training
– Daily cash deposits
– Serially-numbered
documents
– Document matching
– Information technology
– And a host of others!

14. 12-14