expenditure cycle
It is operational with prewired connections; it contains all necessary hardware and software.
four basic expenditure activities
-Ordering materials, supplies, and services.
-Receiving materials, supplies, and services.
-Approving supplier invoices.
-Cash disbursements.
Ordering materials, supplies, and services:
- Receive purchase requisitions from inventory control, various departments, and production cycle * Provide purchase orders to inventory control, various departments, production cycle, and suppliers * Store details of suppliers, inventory, and purchase orders
Receiving materials, supplies, and services:
- Receive goods and packing slips from suppliers * Provide receiving reports to inventory stores (Warehouse) * Store and retrieve purchase orders and inventory details
approving supplier invoices:
- Receive invoices from suppliers * Obtain receiving reports from inventory stores * Access purchase order details * Update accounts payable and general ledger
cash disbursement
- Send payments to suppliers * Receive voucher packages from the invoice approval process * Update accounts payable and general ledger * Access accounts payable
What is the main purpose of a purchase requisition?
Documenting and specifying details such as requisitioner, delivery location, item descriptions, quantity, and price for requested items
What is the key function of a purchase order?
Formally requesting a supplier to sell and deliver specified products at designated prices, and becoming a contract upon supplier acceptance.
info needed for purchase requisition
-Requisitioner Details: Identify who is making the request.
-Delivery Information: Specify the delivery location and the date by which the items are needed.
-Item Details: Include item numbers, descriptions, quantities, and expected prices.
-Supplier Information: Suggest a supplier if applicable.
info needed for purchase order
-Supplier Information: Name and address of the supplier.
-Order Details: Purchase order number, order date, and requisition number.
-Item Information: Item numbers, descriptions, quantities, and unit prices.
-Delivery Information: Delivery location, requested delivery date, and shipping method.
-Terms and Conditions: Payment terms, F.O.B. (Free on Board) terms, and any special remarks.
reorder points serve as an internal control against
-data accuracy
-perpetual inventory system
-physical counts
The ______ is responsible for accepting and inspecting deliveries from suppliers and usually reports to the warehouse manager, who in turn reports to the vice president of manufacturing. The ______department, which also reports to the warehouse manager, is responsible for storing the goods.
receiving department ; inventory stores department
receiving report
include date received, shipper, supplier, and purchase order number, item number, description, unit of measure, and quantity of items received
what control is used for: purchasing items not needed
perpetual inventory system
what control is used for: mistakes in counting
require receiving employees to sign receiving report
what control is used for: errors in supplier invoices
requiring detailed receipts for procurement card purchases
what control is used for: duplicate payments
policy to pay only from original copies of supplier invoices
approving invoices (process)
Upon receipt of a supplier’s invoice, the accounts payable department is responsible for matching it with a corresponding purchase order and receiving report. (combination of supplier invoice + supporting document is known as voucher package._
cash disbursement (process)
cashier (who reports to treasurer) is responsible for paying suppliers.
-Payments are made when accounts payable sends the cashier a voucher package
custody function is performed by
cashier
authorization/recording functions is performed by
the purchasing and account payable departments
receiving (process)
-a receiving clerk verifies that the goods were ordered by comparing the purchase order number on the supplier’s packing slip with the open purchase order file.
-detailed are recorded on receiving report
3-way matching
-a control mechanism used to prevent errors and fraud in the payment process.
- matches 3 documents ; purchase order, receiving reports, supplier invoice
