IKEA Revenue Cycle Analysis - Example

Accounting Information System Number 3 Revenue Cycle. As mentioned in 3.0 above, the revenue cycle is a vital toolfor the control of revenue in the company. The revenue cycle will help IKEA group to know their market share and position among its competitors in the industry. To be effective the cycle involves several actors that are responsible for various processes that are inherent in the cycle. These include the customer, the sales personnel, the accounts clerk and the inventory clerk. These actors relate with each other exchanging information, data and documents that eventually completes the revenue cycle. The cycle begins from the moment the client or customer issues a request for purchase of products and services from the IKEA group and it is completed once the client pays for the goods or services offered by the company and the products are collected or delivered. The sales are handled by the sales personnel who receive all the orders made by the customers and prepare product and service confirmation documents and invoices that will be used by the customer to make payments. The inventory clerk maintains the inventory and provides data and information regarding the availability of products and services. The accounts clerk receives payments for the products and services from the customers. Essentially, the customer initiates the revenue cycle by making an order to the sales department and also completes it by making payments for the products received from the company. 4.0 Revenue cycle processes, Data files and document flowchart As mentioned above, the cycle has several processes that must be undertaken by different actors to complete the cycle. These include: a) Order Processing: The customer makes and order to the company by issuing a purchase order to the sales department. The sales personnel receive the purchase order, enter it into the system and forward it to the inventory clerk who confirms availability of the ordered products. Order processing information is stored in a database file named orders. The file is in form of a table that has all the details of a purchase order made by a customer. Additionally, the sales personnel also capture the customer details during this process and save it in a separate file named clients. Documents generated by this process are the Purchase order and a confirmation statement. b) Billing: Once the Inventory clerk confirms availability of the products, the sales personnel prepares an invoice for the items and sends it to the customer. Three copies of the invoice are generated by the sales personnel, the first invoice is sent to the customer, the second copy is sent to the accounts department and the third is saved by the inventory clerk. The inventory clerk also maintains and updates records of all products in the company in a file named inventory. Therefore, the inventory clerk has two files, the inventory file and another file named Invoices that has all the invoices for all purchase orders made. This helps to accurately maintain the inventory. c) Payment: The customer receives the invoice and makes subsequent payments to the accounts clerk. The accountant receives the payments and confirms with the invoice before issuing a receipt for payment. The payments are made by cheque, depositing in the bank or by cash. d) Delivery: In some cases deliveries are made to the client after payment. The delivery is done once payment has been verified. The clerk then prepares a dispatch note or delivery note for the products and services together with a receipt of payment issued by the accounts clerk. The following document flowchart clearly illustrates the flow of the mentioned documents in the revenue cycle. 5.0 Database structure The database is created using the Ms Access 2010 RDMS program. The database is made of tables that form the f storage. The files mentioned in 4.0 above namely; Customer, Inventory, Purchase_orders and Invoices are created in form of tables. These tables are made of several fields that form the entry of records into the tables. This section provides an illustration of these files including screenshots from the Ms Access database. i) Customers. This file has details of all customers in the IKEA group. The details are entered and maintained by sales personnel in the sale department. The table is made up of several fields such as: Customer_Id, Customer_Name, Address, PhoneNo, and Email_address. The customer_Id is the primary key that uniquely identifies the customer in the table. The screen shot below shows the table created in Ms Access 2010 that contains a few records of customers stored in the database. ii) Purchase_Orders. Purchase_orders table stores all the purchase orders made by different clients. The table is also maintained by the sales personnel in the sales department. Once the client makes an order the details of the purchase orders are stored in this table. The table is made of the following fields: Order_No, Customer_No, Customer_Name, Product_name, Quantity, Date. The Order_no is the primary key to the table; Customer_No is the composite key that links the order to the customer in the customer table. The Screen shot below shows the structure of the table containing a few records in the database. iii) Inventory The inventory table is maintained by the inventory clerk. This table contains the details of all products that are available in the company. The table includes all the product details that include product_no, product_name, quantity in stock, and the price. The Primary key in the table is the Product_No. It uniquely identifies each product in the database. The screen shot below shows the table in Ms Access. iv) Invoices Another table stored in the database is the list of invoices issued for products ordered by the customers. The invoice table stores all invoices issued in the company. The invoice contain details such as; Invoice_no, order_no, Date, Customer_no, Customer_name, Product_no, Product_name, Quantity and Price. The invoice_no is the primary key, with other foreign keys that link to the various tables in the database. the order no links to the purchase order table where all the records of the purchase order are retrieved. The screen shot below shows the details of the table as stored in the Ms Access database. Reference Hall, James. 2004. Accounting Information Systems. 4th ed. Mason, OH: South-Western Cengage Learning. Roger, Chiang, Siau Keng, and Hardgrave Bill. Systems Analysis and Design: Techniques, Methodologies, Approaches, and Architectures. M.E. Sharpe, 2009. Read More