Chapter 9
Expenditures Processes and controls-purchases
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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
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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