Purchasing and Cash Disbursement
Chapter 9 – Auditing the Expenditure Cycle
Summary
Purchases and Cash Disbursement Procedures Using Batch Processing Technology
Many batch system functions are the same as those in a manual purchase system. The main difference is that the routine accounting tasks are automated.
Data Processing Department: Step 1 – the purchasing process begins in the data processing department, where the inventory control function is performed. The revenue cycle (in retailing firms) or the conversion cycle (in manufacturing firms) actually initiates this activity. When inventories are reduced by sales to customers or usage in production, the system determines if the affected item in the inventory subsidiary file have fallen to their reorder points. If so, a record is created in the open requisition file. Each record in the open requisition file defines a separate inventory item to be replenished. At the end of the day, the system sorts the open requisition file by vendor number and consolidates multiple items from the same vendor onto a single requisition. Copies of these documents go to manual procedures in the purchasing and accounts payable departments.
Purchasing Department – upon receipt of the purchase requisition, the purchasing dept prepares a five-part purchase order. Copies go to the vendors, accounts payable, receiving, data processing, and the purchasing departments own file. A computer program identifies inventory requirements and prepares traditional purchase requisitions, thus allowing the purchasing agent to verify the purchase transaction before placing the order. Alternative approaches for authorizing and order inventories: 1. The system advances the procedures and prepares the purchase order documents and sends them to the purchasing dept for review and signing. The purchasing agent then mails the approved purchase orders to the vendors and distributes copies to other internal users. 2. Expedites the ordering process by distributing the
Summary
Purchases and Cash Disbursement Procedures Using Batch Processing Technology
Many batch system functions are the same as those in a manual purchase system. The main difference is that the routine accounting tasks are automated.
Data Processing Department: Step 1 – the purchasing process begins in the data processing department, where the inventory control function is performed. The revenue cycle (in retailing firms) or the conversion cycle (in manufacturing firms) actually initiates this activity. When inventories are reduced by sales to customers or usage in production, the system determines if the affected item in the inventory subsidiary file have fallen to their reorder points. If so, a record is created in the open requisition file. Each record in the open requisition file defines a separate inventory item to be replenished. At the end of the day, the system sorts the open requisition file by vendor number and consolidates multiple items from the same vendor onto a single requisition. Copies of these documents go to manual procedures in the purchasing and accounts payable departments.
Purchasing Department – upon receipt of the purchase requisition, the purchasing dept prepares a five-part purchase order. Copies go to the vendors, accounts payable, receiving, data processing, and the purchasing departments own file. A computer program identifies inventory requirements and prepares traditional purchase requisitions, thus allowing the purchasing agent to verify the purchase transaction before placing the order. Alternative approaches for authorizing and order inventories: 1. The system advances the procedures and prepares the purchase order documents and sends them to the purchasing dept for review and signing. The purchasing agent then mails the approved purchase orders to the vendors and distributes copies to other internal users. 2. Expedites the ordering process by distributing the