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