CHAPTER 7 ACQUISITION/PAYMENT PROCESS
AFTER STUDYING THIS CHAPTER YOU SHOULD BE
ABLE TO:
1. IDENTIFY THE MAJOR ACTIVITIES OF THE
ACQUISITION/PAYMENT PROCESS
2. EXPLAIN HOW GOODS AND SERVICES ARE
PROCURED FROM VENDORS
3. ****DESCRIBE THE FLOW OF TRANSACTIONS
THROUGH THE ACQUISITION/PAYMENT PROCESS
4. ****SPECIFY THE PRINCIPAL MASTER AND
TRANSACTION FILES IN THE ACQUISITION/PAYMENT
PROCESS AND EXPLAIN THEIR CONTENT AND USE
5. ****IDENTIFY THE PRINCIPAL DOCUMENTS AND
REPORTS IN THE ACQUISITION/PAYMENT PROCESS
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THE ACQUISITION/PAYMENT PROCESS IS
CONCERNED WITH THE PROCUREMENT OF
RESOURCES BY THE ORGANIZATION BOTH TANGIBLE AND INTANGIBLE
ALSO CALLED EXPENDITURE OR PURCHASING
CYCLE
INCLUDES PURCHASING
ACCOUNTS PAYABLE
CASH DISBURSEMENT
APPLICATIONS
INCLUDES RECEIVING - INTERFACES WITH
CONVERSION PROCESS (INVENTORY)
AND CASH DISBURSEMENTS - INTERFACES
WITH THE FINANCING PROCESS
PERSONNEL AND PAYROLL SHOWN AS A
SEPARATE PROCESS IN THE HOLLANDER
TEXT CALLED THE HUMAN RESOURCE
PROCESS
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DATA STORAGE, INPUTS, AND OUTPUTS IN THE
ACQUISITION/ PAYMENT PROCESS
MASTER FILES
1. VENDOR MASTER FILES
TWO FILES:
A. SUPPLIER MASTER FILE: NAME,
ADDRESS, TERMS
.EACH RECORD CORRESPONDS TO A PARTICULAR
VENDOR - ORDERED ON VENDOR #
.RECORDS RETRIEVED BY VENDOR #
B. SUPPLIER HISTORY FILE:
(SUPPLIER REFERENCE AND HISTORY FILE)
VENDOR PERFORMANCE HISTORY
RETURNS, DELIVERY TIME
2. INVENTORY MASTER FILE
3. (SUPPLIER) ACCOUNTS PAYABLE MASTER FILE
4. GENERAL LEDGER MASTER FILE
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TRANSACTION FILES
1. OPEN PURCHASE ORDER FILES
.CONTAINS DATA ON ALL PURCHASE ORDERS
THAT REMAIN OPEN BECAUSE THE ORDER HAS
NOT BEEN FILLED
.RECORD IS WRITTEN WHEN THE PURCHASE
ORDER IS ISSUED
.REMAINS OPEN UNTIL THE ENTIRE ORDER HAS
BEEN RECEIVED
.COPIES OF PURCHASE ORDERS ARE HARD COPY
BACK UP
.ORDERED ON PURCHASE ORDER #
.CLOSED RECORDS PURGED AT POINT IN TIME
2. OPEN VOUCHER FILE
.CONTAINS DATA ON OUTSTANDING ACCOUNTS
PAYABLE VOUCHERS
.RECORDS ARE ADDED UPON RECEIPT OF VENDOR
INVOICES AND REMAIN OPEN UNTIL INVOICE IS
PAID
.PARTIAL PAYMENT LEAVES THE RECORD OPEN
.PURPOSE TO TRACK VOUCHERS UP TO THE TIME
OF PAYMENT
.PERMITS PREPARATION OF CASH REQUIREMENTS
FORECAST
3. CASH DISBURSEMENTS TRANSACTION FILE
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.ALSO CALLED CHECK FILE
.RECORDS CASH DISBURSEMENTS TO VENDORS
.INTERFACES WITH REPORTING AND
INVESTMENT CYCLES
.PROVIDES A BASIS FOR POSTING CASH
DISBURSEMENTS TO THE CASH ACCOUNT IN THE
GENERAL LEDGER APPLICATION - WHICH IS
WHERE?
.FIELD FOR VENDOR OR OTHER PAYEE
4. RECEIVING REPORT TRANSACTION FILE
.USED TO RECORD RECEIPT OF GOODS AND
VENDOR SERVICES - INTERFACE WITH THE
CONVERSION PROCESS
5. BACK ORDER TRANSACTION FILE
6. JOURNAL VOUCHER (GENERAL LEDGER)
TRANSACTION FILE
7. BACK UP FILES:
ONE HOLDS CLOSED RECORDS FROM
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OPEN PURCHASE ORDER FILE
CHANGE THE NAME FROM SUPPLIER HISTORY FILE
TO PURCHASE ORDER HISTORY FILE
THE OTHER CLOSED RECORDS FROM
OPEN VOUCHER FILE
CHANGE THE NAME FROM SUPPLIER HISTORY FILE
TO VOUCHER HISTORY FILE
INPUT DOCUMENTS
1. PURCHASE REQUISITION
issued by managers, listing goods and services needed
2. VENDOR SHIPPING DOCUMENTS
prepared by vendors to accompany shipped goods
3. BILLS OF LADING
prepared by common carriers as shipment contracts
4. VENDOR INVOICES
submitted by vendor
list quantity and price of items purchased, shipping and
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handling charges, sales tax
include terms of payment, due date, allowable discounts,
discount dates
OUTPUT DOCUMENTS
1. PURCHASE ORDERS
issued to vendors to order goods or services and imply a
commitment to make payment according to agreed upon
terms and conditions
multiple copies to where?
2. RECEIVING DOCUMENTS
issued upon receipt of goods purchased, goods received
on consignment, goods returned by dissatisfied customers
prenumbered multiple copies to ..........
3. DISBURSEMENT VOUCHERS
prepared to initiate disbursement to vendors and other
authorized payees
prenumbered
voucher package - attached to po, receiver, and vendor
invoice
4. CHECKS
drawn on organization's bank account to disburse cash to
vendors, other payees
accounts payable checks supported by copy of the
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voucher
REPORTS
1. OPEN PURCHASE ORDERS
lists open purchase order file with some supplementary
data from vendor master file
2. OPEN VOUCHERS
SCHEDULE OF AGED ACCOUNTS PAYABLE
3. CASH REQUIREMENTS FORECAST
total dollar amount required to pay outstanding vouchers
MAJOR RISKS IN THE ACQUISITION/PAYMENT
PROCESS
1. Risks concerning procurement of goods and services from
vendors
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. purchases of unneeded goods - excessive inventory, storage
. personal use of company purchase
. intentional misclassification to conceal unauthorized purchase
.unfavorable payment terms
.recorded in wrong amount, not recorded at all, recorded in
wrong period - "shifting" or "smoothing"
2. Risks concerning disbursement of cash
. payments made for goods and services not authorized
.lost purchase discounts
.available discounts taken are not recorded
.duplicate payments
.checks made out to or sent to wrong payee
.alteration of vendor invoice
.check signature forged - or void notation erased
.improper or illegal check requests or payments
.cash disbursements incorrectly recorded or not recorded
.disbursement and distribution of checks occur in different periods
.check is made out to unauthorized individual
.manipulation of bank reconciliation to offset misappropriations
against old outstanding checks
CONTROLS
1. ORGANIZATIONAL CONTROLS
segregation of duties
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.segregation of purchasing, receiving, and preparation of AP
vouchers
.authority to approve vouchers should be separated from
authority to sign checks
if number of employees is too small to achieve proper
segregation of duties......
2. Program and Data Access Controls
user identification codes
passwords - levels of access
file and record locks
designated terminal access
data read-write privilege
3. Authorization Controls
to ensure that input data are authorized
proper authorization for ordering goods and services
for receiving goods and services
for disbursing cash.
authorization for ordering goods and services 10
resides with dept. originating transaction
use of scratch or suspense file
reorder report
batch of purchase requisitions
exception reports of rejected transactions
authorization for receiving goods and services receiving dept. and quality control
receiving verify po, compare goods received to
po and vendor's shipping document
withholding quantity information?
authority to disburse cash lies with accounts payable for vendor payments
treasurer has ultimate responsibility
po compared to vendor invoice
countersignature on all checks over certain
amount
check signing machine & signature plates
locked
4. Data Verification Controls
reasonableness checks - positive / negative quantities
supervisory approval is mandatory on all exception items
5. Processing Controls
a. batch controls
record counts
control totals
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cross footings
hash totals
extend throughout processing
b. prenumbered documents - all processing is complete
po, receivers, vouchers, checks
boxes of blank checks
control of check inventory
6. File Controls
protect data from loss, damage, improper processing
ensure that correct master or table files are used
file maintenance
7. Output Controls
output from system is complete, accurate, appropriately used-check register, check forms
bank reconciliation independent of check printing
and signing
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