Chapter 12, Problem 1CQ

To determine

Identify the correct answer with respect to sales order entry.

Answer to Problem 1CQ

Option (c).

Explanation of Solution

Revenue Cycle: A revenue cycle refers to a set of business activities that linked to providing goods or services to their customers and collect cash payment for such sales. The main objective of a revenue cycle is to provide the right product in the right place at the right time for the right price. Following are the stages in revenue cycle:

1. 1. Sales order entry.
2. 2. Shipping.
3. 3. Billing.
4. 4. Cash collection.

Identify the correct answer with respect to sales order entry.

Justification for correct answer:

Option (c)

Sales order entry is finalized after verification of the customer credit and checking the availability of the required inventory. Therefore, it is the correct answer.

Justification for incorrect answers:

Option (a)

Setting the credit limits of the customers is the function of the credit department and not the process involved in sales order entry. Therefore, it is an incorrect answer.

Option (b)

A bill of lading is a document that contains a detailed list of the ship’s cargo in the form of a receipt. It is given by the master of a ship to the person consigning the goods. Preparing a bill of lading is a part in the overall sales process. Therefore, it is an incorrect answer.

Option (d)

A sales return indicates the return of the merchandize to the seller by the customer. The function of approval with respect to the sale return is done by an individual outside the sales department. Therefore, it is an incorrect answer.

Therefore, the correct answer is Option (c).