Purchase Cycle - PowerPoint

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					EXPENDITURE CYCLE
          Chapter 13
 Acquire Goods and Services
 Pay for Goods and Services
         Spring 2002
If the Expenditure Cycle Fails

 Inventory is under-stocked.
 Inventory is over-stocked.
 Disbursements made for
  unauthorized purposes.
      Cash Receipt Fraud

Unrecorded Sales             30%
A/R - customer adjustments   18%
A/R - lapping                17%
No attempt to conceal        14%
  Cash Disbursement Fraud

Fictitious A/P or Customer Refunds      24%
Unauthorized loans                      10%
Payroll - overstate earnings - self     7%
Payroll - overstate earnings - others   3%
Payroll - fictitious employees          2%
 Expenditure Cycle is Mirror
     of Revenue Cycle

Revenue Cycle          Expenditure Cycle
 Create Sales Order    Create PO
 Ship Goods            Receive Goods
 Send Invoice          Receive Invoice
 Collect Cash          Disburse Cash
Identify a Need

   Need to know when to order
    » Reorder point, two bin system,
      MRP
   Need to know what to order
    » EOQ, MRP, JIT
   Needs identified outside of
    purchasing.
Approve Requisitions

         Needs communicated to
          purchasing
          » Use purchase requisition
            (p. 470)
         Purchasing reviews
          requisition
          » Proper approval
          » Within budgets
              Select Vendor

   Use approved vendor list.
    » You get what you pay for!
   Important factors in this
    decision:
    » Price and quality of product
    » Ability to deliver on time
    » Service after the sale
    » Other features
Create Purchase Order

         Purchase order
          becomes contract
          between buyer and
          vendor.
         P.O. example: p. 473
         System example: p. 474
         Alternatives to POs

   Procurement Cards
    » Focus 13.2 (p. 476)
   Custom On-line
    Catalogues
Control Over Purchasing Agents

    True Story:
     » Purchasing agent given Bulls tickets.
     » Purchasing agent given Weber grill.
    What can be done to assure that
     purchasing agents engage in arms
     length transactions?
              Receive Goods



   Count & compare to packing slip & P.O.
    » Test basis?
    » May also use a “blind” P.O.
 Inspect quality.
 Document on receiving report.
         Deliver Goods

 Route goods to
  warehouse or other
  departments.
 End users sign for
  goods.
 Examples: p. 478 &
  479.
      Approve Payment

Purchase Order
= Receiving Report
= Invoice
                     }   Approved Invoice


          Record liability.
          File by due date.
           Prepare & Make
            Disbursement

 Cashier prepares check.
 Treasurer
    » reviews supporting documentation
      before signing check.
    » signs check, cancels supporting
      documentation, and mails check
   Record disbursement.
                   Summary

Order Goods

              Receive Goods


                          Approve Invoice

                                            Disburse Cash

				
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