Transcript here - Pearson

The Expenditure Cycle: Purchasing
to Cash Disbursements
Chapter 13
Copyright © 2015 Pearson Education, Inc.
13-1
Learning Objectives
• Explain the basic business activities and related
information processing operations performed in
the expenditure cycle.
• Discuss the key decisions to be made in the
expenditure cycle, and identify the information
needed to make those decisions.
• Identify major threats in the expenditure cycle,
and evaluate the adequacy of various control
procedures for dealing with those threats.
Copyright © 2015 Pearson Education, Inc.
13-2
Basic Expenditure Cycle Activities
•
•
•
•
Order materials, supplies, and services
Receive materials, supplies, and services
Approve supplier (vendor) invoice
Cash disbursement
Copyright © 2015 Pearson Education, Inc.
13-3
Order Goods (Materials/Supplies) or
Services Processing Steps
• Identify what, when, and how much to purchase
▫ Source document: purchase requisition
• Choose a supplier
▫ Source document: purchase order
Copyright © 2015 Pearson Education, Inc.
13-4
Ordering Goods/Services
Threats
Controls
1.
1 a. Perpetual inventory system
b. Bar-coding, RFID
2 a. Review and approval of
purchase requisitions
3 a. Price lists
b. Competitive bids
4 a. Use approved suppliers
5 a. Monitor supplier
performance
b. Require quality certification
6 a. Purchase from approved
suppliers
7 a. Supplier audits
b. Prohibit gifts
13-5
2.
3.
4.
5.
6.
7.
Stockouts and excess
inventory
Purchasing items not needed
Purchasing items at inflated
prices
Purchasing goods of poor
quality
Unreliable suppliers
Purchasing from
unauthorized suppliers
Kickbacks
Copyright © 2015 Pearson Education, Inc.
Receiving Process
• Goods arrive
▫ Verify goods ordered against the purchase order
(what, how much, quality)
▫ Source document: receiving report
Copyright © 2015 Pearson Education, Inc.
13-6
Receiving Goods or Services
Threats
Controls
1.
2.
3.
4.
1 a. Authorized purchase orders
needed before receiving
goods
2 a. Bar codes or RFID
3 a. Budget controls and audits
4 a. Restrict physical access to
inventory
b. Document all inventory
transfers
c. Segregate custody vs.
receiving of inventory
13-7
Accepting unordered items
Mistakes in counting
Verifying receipt of services
Inventory theft
Copyright © 2015 Pearson Education, Inc.
Approve Supplier Invoice and Cash
Disbursements
• Match the supplier invoice to:
▫ Purchase order
▫ Receiving report
supplier invoice + purchase order + receiving report = voucher
• Approve supplier invoice for payment
▫ Source document: disbursement voucher
• Pay vendor
Copyright © 2015 Pearson Education, Inc.
13-8
Approve Supplier Invoice
Threats
Control
1. Errors in supplier invoice
2. Mistakes in posting to
accounts payable
1 a. Verify invoice accuracy
2 a. Data entry edit controls
b. Reconcile detailed accounts
payable records to the
general ledger accounts
payable account
Copyright © 2015 Pearson Education, Inc.
13-9
Cash Disbursements
Threats
Controls
1.
2.
3.
4.
5.
6.
1 a. File invoices by due date to
take advantage of discounts
2 a. Match supplier invoice to
supporting documents
(purchase order, receiving
report)
3 a. Pay only original invoices
b. Cancel supporting document
when payment is made
4 a. Physical security of checks
b. Separation of duties
c. Reconcile bank accounts
5 a. Check Protection machines
6 a. Cash flow budget
13-10
Failure to take discounts
Pay for items not received
Duplicate payments
Theft of cash
Check alteration
Cash flow problems
Copyright © 2015 Pearson Education, Inc.
Key Terms
• Expenditure cycle
• Economic order quantity
(EOQ)
• Reorder point
• Materials requirement
planning (MRP)
• Just-in-time (JIT) inventory
system
• Purchase requisition
• Purchase order
• Blanket purchase order
Copyright © 2015 Pearson Education, Inc.
•
•
•
•
•
•
•
•
•
Vendor-managed inventory
Kickbacks
Receiving report
Debit memo
Voucher package
Nonvoucher system
Voucher system
Disbursement voucher
Evaluated receipt settlement
(ERS)
• Procurement card
• Imprest fund
13-11