Purchasing and Cash Disbursement

5548 Words Dec 24th, 2008 23 Pages
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.
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The checks are then mailed to the suppliers.

Cash Disbursement: Accounts Payable – upon receipt of the check copies, the accounts payable clerk matches them with open vouchers and transfers these closed items to the closed voucher file. Expenditure cycle process concludes with this step.

Reengineering the Purchases/Cash Disbursement System – replicates many of the procedures in a manual system. In particular, the accounts payable task of reconciling supporting documents with supplier invoices and labor intensive and costly.

Data Processing – the following tasks are performed automatically: 1. Inventory file is searched for items that have fallen to their reorder points. 2. A record is entered in the purchase requisition file for each item to be replenished. 3. Requisitions are consolidated. 4. Vendor mailing information is retrieved. 5. Purchase orders are prepared and sent to the vendor. 6. A record of each transaction is added to the open purchase order file. 7. A transaction listing of purchase orders is sent to the purchasing dept for review.

Receiving Department – when the goods arrive, the receiving clerk accesses the open purchase order file in real time by entering the purchase order number taken from the packing slip.

Data Processing – the following are performed automatically by the system: 1. Quantities of items received are matched against the open purchase order record. 2. A record is
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