-
expenditure process consists of two sub-processes
purchases and cash disbursements
-
the purchase process consists of:
- -Purchase requisition
- -Receiving report
- -Vendor's invoice
- -Purchases Transaction file and A/P Master file
- -Master File
-
step 1: purchase requisition
purchase process begins with a purchase requisition. when inventory levels drop below the reorder point, the inventory control department prepares a purchase requisition
-
what is a purchase requisition
request and authorization for the purchasing department to order more inventory
-
one copy of the purchase requisition is sent to the ____ dept and another is sent to the ____ dept
- first: purchasing dept
- sec: sent to the A/P dept
-
Internal Controls for step 1 (3)
- -Authorization: approved purchase requisition serves as the authorization for inventory to be purchased
- -Segregation of duties: inventory control dept, which keeps detailed inventory records. Separated from warehouse
- -Adequate doc and records: purchase requisition forms are pre-numbered
-
Step 2: purchase order
when the purchasing department receives a purchase requisition, the purchasing agent prepares a purchase order
-
for purchase order, one is sent __, 2nd is sent __, 3rd is sent ___
- 1st: mailed to vendor
- 2nd: "blind" copy with quantities omitted to force clerk at loading dock to count the quantity is sent to the receiving dept (warehouse)
- 3rd: sent to the A/P dept
-
internal controls in step 2 (P.O.) - 1
-Adequate docs and records: purchase order forms are pre-numbered
-
step 3: receiving report
when the inventory is received at the warehouse receiving dock, the receiving clerk prepares a Receiving report, which indicates the quantity and condition of the inventory received
-
A copy of the R.R. is sent to the __
A/P department where the A/P clerk matches it with the corresponding purchase requisition and purchase order. this set of 3 documents is then temp. filed
-
step 3 internal controls (R.R.) (3)
- -Adequate docs and records: R.R. are pre-numbered.
- -Segregation of duties: warehouse, which has custody of inventory, is separate from the A/P dept, which records purchases transactions (custody of assets separate from recorded-keeping)
- -Supervision: on warehouse receiving dock, supervisor ensures that (1) receiving clerk(s) properly inspect and count inventory as it is unlocked from the truck and (2) inventory isn't stolen before it is placed in warehouse
-
step 4: vendor's invoice
when the vendor's invoice is received from the vendor, the clerk in the A/P dept matches the prices and quantities on the invoice with the related prices and quantities on the Purchase Req. and P.O. and quantities on the Receiving report. then clerk performs step 5 below.
-
internal controls in step 4 (vendor's invoice) 1
independent verification- the A/P clerk verifies that the info (prices/quants) on the vendor's invoice matches that on the purchase requisition, purchase order, and receiving report
-
purchases transaction file and A/P master file
after recording the transaction, the A/P clerk then files the documents together, according to the payments due date, in the open A/P file, awaiting payment
-
internal controls (step 5)- 3
- -Segregation of duties: within the record-keeping function, A/P department is separate from the G/L dept
- -Access Controls: locks/passwords
- -Independent Verification: periodically, A/P subsidiary ledger is reconciled with the A/P account in the G/L
-
step 6: Master file (G/L)
periodically, the A/P dept sends totals for daily (or weekly) purchases transactions to the G/L dept for posting to the Purchases (or inventory) and A/P accts in the master file (G/L)
-
step 6 internal controls (master file) 3
- -segregation of duties- same as 5
- -access controls- locks/passwords restrict G/L
- -Independent verification- same as step 5
|
|
