EXPENDITURE CYCLE - Bradley University
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Transcript EXPENDITURE CYCLE - Bradley University
EXPENDITURE CYCLE
Chapter 13
Acquire Goods and Services
Pay for Goods and Services
Spring 2002
If the Expenditure Cycle Fails
Inventory is under-stocked.
Inventory is over-stocked.
Disbursements made for
unauthorized purposes.
Cash Receipt Fraud
Unrecorded Sales
30%
A/R - customer adjustments
18%
A/R - lapping
17%
No attempt to conceal
14%
Cash Disbursement Fraud
Fictitious A/P or Customer Refunds
24%
Unauthorized loans
10%
Payroll - overstate earnings - self
7%
Payroll - overstate earnings - others
3%
Payroll - fictitious employees
2%
Expenditure Cycle is Mirror
of Revenue Cycle
Revenue Cycle
Create Sales Order
Ship Goods
Send Invoice
Collect Cash
Expenditure Cycle
Create PO
Receive Goods
Receive Invoice
Disburse Cash
Identify a Need
Need to know when to order
» Reorder point, two bin system,
MRP
Need to know what to order
» EOQ, MRP, JIT
Needs identified outside of
purchasing.
Approve Requisitions
Needs communicated to
purchasing
» Use purchase requisition
(p. 470)
Purchasing reviews
requisition
» Proper approval
» Within budgets
Select Vendor
Use approved vendor list.
» You get what you pay for!
Important factors in this
decision:
» Price and quality of product
» Ability to deliver on time
» Service after the sale
» Other features
Create Purchase Order
Purchase order
becomes contract
between buyer and
vendor.
P.O. example: p. 473
System example: p. 474
Alternatives to POs
Procurement Cards
» Focus 13.2 (p. 476)
Custom On-line
Catalogues
Control Over Purchasing Agents
True Story:
» Purchasing agent given Bulls tickets.
» Purchasing agent given Weber grill.
What can be done to assure that
purchasing agents engage in arms
length transactions?
Receive Goods
Count & compare to packing slip & P.O.
» Test basis?
» May also use a “blind” P.O.
Inspect quality.
Document on receiving report.
Deliver Goods
Route goods to
warehouse or other
departments.
End users sign for
goods.
Examples: p. 478 &
479.
Approve Payment
Purchase Order
= Receiving Report
= Invoice
}
Approved Invoice
Record liability.
File by due date.
Prepare & Make
Disbursement
Cashier prepares check.
Treasurer
» reviews supporting documentation
before signing check.
» signs check, cancels supporting
documentation, and mails check
Record disbursement.
Summary
Order Goods
Receive Goods
Approve Invoice
Disburse Cash