Accounting Information Systems:
A Business Process Approach
Chapter Ten: The Acquisition Cycle Purchase Invoices and Payments
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Learning Objective
 The typical events and processes for
recording purchase invoices
 The ways that workflow and input controls
improve data entry and processing
 The general ledger significance of
acquisition cycle reports
 End of period activities in the acquisition
cycle
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Learning Objective (Continue)
 Use activity diagrams UML class diagrams, and
record layouts
 Identify execution and recording risks in the
acquisition cycle
 Identify controls that mitigate acquisition cycle
risks
 Use accounting packages for recording purchase
invoices making payments and creating reports
 Interpret common documents and reports in the
acquisition cycle
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Tables: 10.1 - 10.6
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Table 10.1 Events in ELERBE’s Acquisition Process
Event
Number Event
E6
Record supplier invoice*
E7
Select invoices for
payment
E8
Approve payment
E9
Prepare checks
E10
E11
Sign checks
Complete payment
Activities
Accounts payable clerk prepares a
batch of invoices, checks invoices
against purchasing/receiving
documents, and enters batch into
computer system.
Accounts payable clerk selects
invoices for payment based on
discount date and due date.
Controller approves checks selected
for payment.
Accounts payable clerk prints
checks.
Controller signs the checks.
Clerk mails the checks and posts
the payments.
*You can see an illustration of a purchase invoice in Figure 10.5 on page 499.
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Table 10.2 Workflow Table
Actor
Activity
Record supplier invoice (E6)
Supplier
1. Sends invoice.
Accounts payable clerk
2. Assembles a batch of invoices.
3. Counts the number of invoices.
4. Calculates dollar totals and hash totals.
5. Compares invoice to purchase order and receiving
information.
6. Enters purchase invoice.
Computer
7. Records invoice in Invoice Table.
Accounts payable clerk
8. Prints purchases journal.
9. Reviews purchases journal and compares to batch total.
10. Makes any corrections needed.
11. Selects option to post invoices.
Computer
12. Adds records to the General_Ledger_Transfer Table and
updates balance due in Supplier Table.
13. Sets Post_Date field in invoice record to the current date.
Select invoices for payment (E7)
Accounts payable clerk
14. Prints open payables report.
15. Selects invoices for payment.
Computer
16. Sets To_Pay field in invoice record to “Yes.”
Accounts payable clerk17. Prints cash requirements report.
Approve payment (E8)
Accounts payable clerk
18. Gives cash requirements report to controller.
Controller
19. Approves payment.
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Table 10.2 Workflow Table (Concluded)
Prepare checks (E9)
Accounts payable clerk
20. Makes necessary corrections.
21. Prints checks.
Computer
22. Records payment in Payment Table.
23. Sets Paid field in invoice record to “Yes.”
Signs checks (E10)
Accounts payable clerk
24. Gives checks to controller.
Controller
25. Signs checks.
Completes payment (E11)
Accounts payable clerk
26. Mails checks.
27. Prints cash payments journal.
28. Selects option to post payments.
Computer
29. Updates the General_Ledger_Transfer Table and balance due
in Supplier Table.
30. Sets Post_Date field in payment record to the current date.
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Table 10.3 Events and Tables
Event Number
Event
Transaction Table*
Master Table**
E6
Record supplier
invoice (and post)
Invoice
General_Ledger_
Transfer
None
Supplier
E7
E8
E9
E10
E11
Select invoices
for payment
invoice data
Comments
None
Event uses
recorded
previously
Manual event
Approve
payment
Prepare checks
None
None
Payment
None
Sign checks
Complete
payment
(and post)
None
General_Ledger_
Transfer
Update occurs in
event E11
None
Supplier
*Name of transaction table to which records are added.
**Name of master table that is updated when the transaction is posted.
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Table 10.4 Record Layouts for Acquisition Cycle
Supplier Table
Supplier#
349
Name
Contact TeleG/L_
Address
_Personphone#
Smith
Fall River Jon
Supply
508-555-
1100
Account
DisDue
Discount
count
Balance
_Rate
YTD_
_Due
30
10
.02
$0
$0
Stevens 1851
Employee Table
Employee#
Name
Position
122-22-3333
613-20-7891
074-31-2525
131-31-3131
034-11-2222
Mike Morgan
Deborah Parker
Stephen Larson
Kevin Smith
Mary Brown
Inventory clerk
Supervisor
Purchasing officer
Receiving clerk
Accounts payable clerk
Requisition_Detail Table (E3)
Supplier_
Requisition#
Product#
Item#
Quantity
1077
1077
12
5
$13
$18
C-731
M-1992
402
419
Requisition Table (E3)
Requistion_
Requisition#
Date
1077
05/15/03
Price
Employee#
(Requestor)
122-22-3333
Employee#
613-20-7891
(Manager)
349
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Table 10.4 Record Layouts for Acquisition Cycle (Continued)
Purchase_Order Table (E4)
Purchase_Order#
Requisition#
599
1077
Employee#
Purchase_Order_Date (Purchasing Officer)
5/17/03
074-31-2525
Supplier
349
Purchase_Order_Detail Table (E4)
Purchase Supplier
Quantity Quantity Quantity
_Order# _Product# Item#
_Ordered _Received _Canceled Price
599
599
C-731
M-1992
402
419
12
5
10
5
$11
$18
Receipt Table (E5)
Purchase_ Receiving_ Employee#
Receipt# Order#
Date
(Receiving Clerk)
Supplier#
1405
131-31-3131
349
599
05/26/03
Receipt_Detail Table
Receipt# Item#
Quantity
1405
1405
402
419
10
5
Invoice Table (E6)
Voucher#
459
Purchase
Invoice
Employee# Supplier
Due_
Disc_
_Order#
599
_Date
05/27/03
(AP Clerk) _PI#
034-11-2222 #5510
Date
6/27
Date
6/4
Rate
.02
Post_
G/L_Post
Date
05/29/03
_Date
To
Pay?
Paid?
YES
YES
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Table 10.4 Record Layouts for Acquisition Cycle (Concluded)
Payment_Detail Table (E9)
Check#
G/L_Account#
Amount
102
102
102
1000
3100
6050
(201)
205
(4)
Invoice_Detail Table
Voucher# G/L_Account#
Amount
459
459
459
(205)
200
5
3100
1100
6500
Payment Table (E9)
Check#
G/L_Post_
Voucher# Paid_Date Post_Date Date
Cleared
102
459
06/02/03
06/02/03
Yes
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Table 10.5 Batch Totals for Invoice Data Entry
Batch Total
Value
Count
Total amount due
Hash total
Date
3
$440
1396 (sum of Supplier#s)
05/29/03
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Table 10.6 Controlling Recording Risks for Purchase Invoices: Input Controls
For each of the fields in the data tables below, an input control is suggested.
Invoice Table
PurSupEmVouch- chase
plier Invoice
ployee#
To_
Post_
er#
_Order# _PI# _Date
(AP clerk)
Date
459
599
5510
05/27/03
034-11-2222
Invoice_Detail Table
Voucher# G/L_Account#
Amount
459
459
459
200
5
(205)
1100
6500
3100
06/27/03
Due_
Disc_
Date
06/07/03
Rate
Date Pay?
G/L_
Post_
Paid?
Date
.02
Attribute
Description
Input Controls
Voucher#
the
A unique serial number
Voucher# is assigned (computer-generated) by
Purchase_
Order#
Supplier_PI#
the company’s
Identifies the purchase
order related to the
invoice
Number assigned by the
supplier to the invoice
computer for each purchase invoice entered.
Copied from Receipt Table.
Difficult to control since it is not under
control. Careful proofreading is required if the field
is
Invoice_Date
dates and not
considered important.
Date that appears on the
purchase invoice
Use format checks to ensure 13
entry of
letters or numbers. Use a validation rule, such as
Table 10.6 Controlling Recording Risks for Purchase Invoices: Input Controls (Concluded)
Attribute
Description
Employee#
on information
(AP clerk)
be
Account payable clerk’s
Input Controls
Employee# could be displayed based
Employee#, included
entered at log-in time. Referential integrity could
for accountability
enforced between Employee and Purchase Order
tables to ensure that Employee# in
Table corresponds to an
Employee Table.
Default terms may be included in supplier master
Purchase Order
actual employee in the
Due_Date
Date payment is due
table.
that requires that
purchase invoice date.
Disc_Date
Payment must be made
supplier master
by this date to get the
dates.
early payment discount
rule
Use format checks to ensure entry of valid dates.
Validation rule could be constructed
this date not be earlier than the
Defaults terms may be included in
table. Use format checks to ensure entry of valid
As with Invoice_Date and Due_Date, a validation
Rate
Discount rate
could be constructed.
Defaults terms may be included in supplier master
table. Use format checks to ensure
entry of valid rates.
Post_Date
To_Pay?, Paid?
G/L_Account#
supplier
Blank until the record has
been posted
General ledger account
Computer automatically sets these fields to a blank
during invoice entry.
Default account numbers set up during
number
Amount to be
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maintenance can be used.
Format checks can be used to ensure that the
Amount
Risks and Control
 An event that never occurred is recorded
 Vendor invoice is not recorded, recorded
late, or recorded twice
 Invoice data item is not accurate
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Select Invoices for Payment
Step 1:
 Print an open payable report to get a list of
all unpaid bills
Step 2:
 Select invoices for payment
Step 3:
 Print a cash requirements report-a listing of
invoices selected in step 2
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Assessing Recording Risks and Controls in
Recording Invoices and Making Payments
 Guidelines for assessing risks:
1.Generic execution risks (cash payment)
2.Information system risks: generic update
risks
 Control Activities:
Workflow controls
Input controls
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Record Purchase Invoice
 Process
1. Accumulate a batch of source documents and
calculate batch totals
2. Enter each document in the batch using an
accounting application
3. Print and edit report of all events in the batch
4. Review the report and make corrections
5. Post the batch
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