AIS EXPENDITURE CYCLE

THE EXPENDITURE CYCLE PART 1:

PURCHASES AND CASH DISBURSEMENTS PROCEDURES.

RQ : 1 , 3 , 9 , 11 .

—RQ1: Differentiate between a purchase requisition and a purchase order?

• A purchase requisition is a request sent to the purchasing department to procure goods or services.
• A purchase requisition is completed by the inventory control department when a need for inventory items is detected.
• A purchase requisition is owned by the originating department and should not be changed by the purchasing department without obtaining approval from the originating department.

A purchase order: is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer.

—The difference between them

• The purchasing department receives the purchase requisitions, and if necessary, determines the appropriate vendor.
• the purchasing department prepares the purchase order, which is sent to the vendor, accounts payable department, and the receiving department.
• If various departments have requisitioned the same item, the purchasing department may consolidate all requests into one order so that any quantity discounts and lower freight charges may be taken.

—RQ3: Distinguish between an AP file and a vouchers payable file?

• Accounts payable file that called open voucher payable that’s file has the invoice that received from the vendor.
• The accounts payable clerk reconcile the financial information with the documents files, record the transaction in the purchase journal and post it to the supplier accounts On the accounts payable subsidiary ledger that called voucher register.
• After the recording of the liability, the accounts payable transfers the source documents (PO , receiving report, and invoice) to the open vouchers payable file.
• —The difference between them
• An open accounts payable file contains all source documents, including invoices, organized by payment date.
• As the due dates become close to the current date , the invoices are pulled from the file and paid.
• Under the voucher system, the accounts payable clerk prepares a cash disbursements voucher upon receipt of all source documents.
• Each cash disbursements voucher represents payment to one vendor.

Multiple invoices may be covered by one voucher.

The voucher system thus allows fewer checks to be written and provides better control over cash disbursements since cash vouchers are assigned and tracked.

—RQ9: What is the purpose of maintaining a valid vendor file?

• Inventories should only be acquired from valid vendors.
• This control procedure helps to deter the purchasing agent from buying inventories at excessive costs and receiving kickbacks or from buying from an entity in which the purchasing agent has a relationship, such as a relative or a friend.

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RQ11: What is the purpose of the blind copy of a purchase order?

• The blind copy contains no quantity or price information about the products being received.
• The purpose of the blind copy is to force the receiving clerk to count and inspect inventories to complete the receiving report.
• A blind copy of the purchase order would be used by the receiving clerk in order to record the quantity of goods received and to confirm the delivery with the supplier.

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