Chapter 9 Expenditures Processes and controls-purchases Prepare a purchase requisition and/or purchase order for goods and services Notify the vendor (supplier) of goods or services needed Receive goods or services, often via common carrier. A common carrier is a trucking company, rail, or air freight company Record the payable Pay the resulting invoice Update the accounting records: o Accounts Payable, Inventory, Expenses, Cash Sales Processes Exhibit 9-3 Receive Purchase Requisition Prepare Purchase Order (P.O.) send PO to vendor (supplier) Receive goods Prepare Receiving Report Receive Invoice Update the accounting records: Accounts Payable, Inventory, Expenses Explain Purchases Journal and Accounts Payable subledger Can use examples on web page Pink Book The Book uses Process Maps, System Flowcharts, Document Flowcharts, Data Flow Diagrams & Entity Relationship Diagrams. We will focus on Document Flowcharts. Exhibit 8-4 walk through the Document Flowchart Purchase Requisition Purchase Order (P.O.) Receiving Report Packing Slip (from Vendor) Bill of Lading (from Vendor) Invoice (from Vendor) Purchases Journal Accounts Payable subledger Authorization of Transactions Segregation of Duties: Authorization Custody of the related assets Recording function purchases inventory handing Cash Disbursements Purch Jnl, AP sub, Inv sub, G.L. Cash Disbursement Processes Prepare a purchase requisition and/or purchase order for goods and services Notify the vendor (supplier) of goods or services needed Receive goods or services, often via common carrier. A common carrier is a trucking company, rail, or air freight company Record the payable Pay the resulting invoice Update the accounting records: o Accounts Payable, Inventory, Expenses, Cash Exhibit 9-14 Vendor Invoices with payments due Prepare check Update Accounts Payable subledger, Cash Disbursements Jnl, G.L. Reconcile Bank Statement Explain Cash Disbursements Journal and Accounts Payable subledger Can use examples on web page Pink Book Exhibit 9-15 walk through the Document Flowchart Purchase Order Invoice (from Vendor) Receiving Report Check Cash Disbursements Journal Authorization of Transactions Segregation of Duties: Authorization Custody of the related assets Recording function One person or department should not have Check signing authority, access to checks and accounts payable records Objective 5 – IT Systems of Expenditures Three-Way match P.O., Receiving Report & Invoice from Vendor Purchasing Dept. prepares a Purchase Order and orders items from Vendor Receiving Dept. confirms SKUs and quantities actually received with the Packing Slip (from the Vendor) and the Purchase Order Receiving Dept. prepares a Receiving Report and cross references the P.O. number on the Receiving Report. When Accounts Payable receives an Invoice (from the Vendor), they match the information on the Invoice with the P.O. and the Receiving Report. Enter in AP subsidiary ledger Authorize payment (create a Check Requisition) Obj 7 - Evaluated Receipt Settlement – receipt of goods triggers payment Obj 8 – EDI - Electronic Data Interchange Obj 9 – E-payables Web based invoices and transfers