Quiz 5: Sales and Collections Business Process

Sales and collection process It is a business activity which involves sale of merchandise, customer record maintenance, billing customers, and maintaining records of payments from customers. It is a complete process of sales, accounting and collecting cash from the customers. Sale and collection process involves generation of accounts receivable, and cash receipts for the financial statements of the business. But these are not the only information that the manager would like to have. The further information that the manager would need to have is: 1. Cost of goods sold- This is the cost of the goods that have been sold by the business. This cost includes the cost incurred during the production and other direct costs which is related to the good. This cost is needed information and the process of sale and collection involves the recognition of the cost of goods sold because, when the accounting is done during the transaction of sale, the cost of goods sold is needed to know what is the profit margin earned by the business selling the goods. 2. Reduction in stock - As a sale is made, there is a turnover in the stock, i.e. the stock is reduced to the extent it is sold. This information is needed to know the inventory of stock left with the company. Thus, the information of reduction in stock and cost of goods sold expense is also needed along with other important expenses.

Sales and collection process When products and services are sold by a firm to its customers and in return the customers pay for the product and services, it is a process which involves sales as well as a collection. The sales and collection process covers all the business activities related to selling of product and services, maintenance of customer records, billing and recording payments made by the customers. Managing accounts receivables through aging accounts and authorizing credit also comes under sales and collection process. In sales and collection process all the accounting transactions are generated that record sales revenue, accounts receivables and receipts in cash. This process also affects those firm's costs of goods sold and inventory that engage in selling merchandise. Sales are generally made in return of cash or credit. It may also include sales tax. When a sale is made in return for cash, the balance of cash increases and when on credit, the accounts receivables are made which is the money that is owed to the firm from sales of product and services. And finally, when a credit customer pays cash, the cash balance increases and accounts receivables are decrease by the amount paid. The selling of product and services is the main activity under the process of sales and collection. When selling takes place then only the sales and collection process starts. Thus, option a is incorrect. The billing customers is not a correct option as when selling is done, the customers are billed as per the quotes decided between the two parties and then only the collection is made. So, it is a part of process of sales and collection. Thus, option b is also incorrect. The management of inventory is a part of process of sales and collection only when a particular firm has engaged in selling of merchandise. Thus, option c is incorrect. The recording of payment is made when customers pays the amount of sales so, it is a part of the sales and collection process. Thus, option d is incorrect. Option e indicates that all of the above are sales and a collection activity is correct as each activity mentioned above. The selling of product and services, billing customers, managing inventory and recording of payment by customers comes under sales and collection process. Thus, the correct option is option .

Unified modelling language (UML) data models These are the representation of databases' conceptual contents in a graphical manner and not in a written manner. And this helps the database users to easily understand what the database designers are trying to convey. Relational tables Relational databases work on relational tables and these tables are the combination of data elements. A table is created when an intersection of vertical columns and horizontal columns happen and cells are created at these intersections. In this case, the sales and collection process of company B is explained. The company employs a flood of salespeople that market the company's surf-oriented products to its customers. The salespeople work hard for their sales by helping its customers in every way possible. They even surf with their customers to help them find the products easily, which could mean surfing for hours. Each sale includes a number of products, and is given a unique invoice number. The payment within 30 days is allowed to its customer and the customer can even pay a lump-sum amount for multiple sales. The inventory is managed by the company by items, each is given a product number. The company also classify its products on the basis of clothing lines, that is, the items on classified according to their intended use. a. The UML diagram for the sales and collection process of the company can be made as follows: In the above diagram a few associations have been shown which can be seen by the multiplicities allotted to them. The clothing lines is associated to the BD products with one-to-many relationship, which means that there are many clothing line for one BD products. BD products and sales are associated to each other with a many-to-many relationship, which means that each product can be sold many times, and a sale can be made for many products in an invoice. Sales and customers are associated to each other with a one-to-many relationship, which means that a customer can be associated to many sales. Sales and employees are associated to each other with a one-to-many relationship, which means one employee can make many sale contracts. Cash receipts (C/R) are associated to each other with a one-to-many relationship, which means that each employee can generate many cash receipts. Cash and cash receipts are related to each other with a one-to-many relationship which means that each cash receipt can generate cash in installments. Cash receipts and customers are related to each other with a one-to-many relationship, which means a customer can be involved with many sales and hence can generate many sales. b. The relational table needed to be framed to describe the UML diagram, where PK is Primary Key, can be made as follows: Clothing lines [Clothing line name (PK), Clothing item, Clothing price point, …] BD product [Unique product number (PK), Product name, Product line, …] Sales [Unique invoice number (PK), Date, Customer Number, Invoice total, …] Customers [Customer number (PK), customer name, customer city, customer state, customer zip, customer phone, Amount paid] Employees [Employee ID (PK), Employee name, Employee address, …] Cash receipt [Cash receipt number (PK), cash amount due, cash received from customer, …] c. To determine the company B's account receivables using the relational table made above, following ways can be adopted: Using customer and sales tables: find out the sum of invoice total from sales table and group by customer table. Using customer and cash receipt tables: find out the sum of cash receipt amount and group by customer table.