Chapter 5 the Expenditure Cycle Part I: Purchases and cash disbursements Procedures
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AIS Chapter 5 Chapter 5 the Expenditure Cycle Part I Summary © © All Rights Reserved DOCX, PDF, TXT or read online from Scribd Did you find this document useful?Is this content inappropriate?Report this Document 100% found this document useful (1 vote) 715 views10 pages Chapter 5 The Expenditure Cycle Part I SummaryOriginal Title:Chapter 5 the Expenditure Cycle Part I Summary Uploaded by0nionrings Description:My summary for AIS Chapter 5 Full description 1.MONITOR INVENTORY RECORDS (Inventory Control)Firms deplete their inventories by transferring raw materials into the production process(the conversion cycle) and by selling finished goods to customers (revenue cycle.Inventory control monitors and records finished goods inventory levels. Wheninventories drop to a predetermined reorder point, apurchase requisitionis preparedand sent to the prepare purchase order function to initiate the purchase process.2.PREPARE PURCHASE ORDER (Purchasing Department)Receives the purchase requisitions, which are sorted by vendor if necessaryPurchase order (PO) is prepared for each vendor.A copy of the PO is sent to set up accounts payable function for filing temporarily in theAP pending file, and a blind copy is sent to the receive goods function, where it is helduntil the inventories arrive.The inventory control clerk file the last copy in the open/closed purchase order file.3.RECEIVE GOODS (Receiving Department)During this time, the copies of the PO reside in temporary files in various departments.At this point, the firm has received no inventories and incurred no financial obligation.There is no basis for making a formal entry into any accounting record. (Firms oftenmake memo entries of pending inventory receipts and associated obligations)Physical count and inspection of received goods.Receipt of Inventories Presentation on theme: "Chapter 5 The Expenditure Cycle Part I: Purchases and Cash Disbursements Procedures 1."— Presentation transcript: 1 Chapter 5 The Expenditure Cycle Part I:
Purchases and Cash Disbursements Procedures 1 2 Objectives for Chapter 5
3 Goals of the Expenditure Cycle 4 A Manual Purchases System
5 A Manual Purchases System 6 A Manual Purchases System 7 A
Manual Purchases System
8 A Manual Purchases System
9 Manual Cash Disbursements System 10 Manual Cash Disbursements System 11 Manual Cash Disbursements System 12 The time lag splits the expenditure transaction cycle into two phases
13 The Expenditure Cycle The time lag splits the expenditure transaction cycle into two phases: physical
phase (purchasing cycle) financial phase (cash disbursements) 2 14 Expenditure Cycle Database 15 The Purchase Requisition 16 Computer-Based Expenditure Applications--Purchases 17 Computer-Based Expenditure Applications--Purchases
18 Computer-Based Expenditure Applications--Cash Disbursements 19 Levels of Automating and Re-Engineering Ordering 20 EDI
Goods CUSTOMER (PURCHASES CYCLE) SELLER (REVENUE CYCLE) 21 Advantages of Real-Time Data Input & Processing Over Batch Processing 22 General Internal Controls 23 Manual Authorization Controls 24 Computer-Based Authorization Controls
25 Segregation of Duties Warehouse (stores) Inventory control 26 Manual Segregation of Functions 27 Computer-Based Segregation of Functions 28 Manual Supervision Within the expenditure cycle, supervision is of highest importance in the Receiving department, where the inventory arrives and is logged in by a
receiving clerk. Need to minimize: failures to properly inspect the assets theft of the assets How do these controls change in a CB environment? 13 29 Computer-Based Supervision
30 Manual Accounting Records
31 Computer-Based Accounting Records
32 Manual Access Controls
33 Computer-Based Access Controls
34 Manual Independent Verification 35
Computer-Based Independent Verification What are the task performed during purchases and cash disbursement processes?Comments. Monitor Inventory Records.. Prepare Purchase Order.. Receive Goods.. Update Inventory Records.. Set Up Accounts Payable.. Identify Liabilities Due.. Prepare Cash Disbursement.. Update AP Record.. What are the steps in accounting cycle explain expenditure cycle for purchase and cash distribution activities?The three basic activities performed in the expenditure cycle are: (1) ordering goods, supplies, and services; (2) receiving and storing these items; and (3) paying for these items. These activities mirror the activities in the revenue cycle.
What are the four basic expenditure cycle activities?Four Components of Expenditure Cycles
Ordering goods and services. Receiving what has been ordered. Approving the invoices presented by vendors and suppliers. Paying the invoices.
Which part of the automated expenditure cycle needs a high degree of control or monitoring or supervision?Within the expenditure cycle, supervision is of highest importance in the Receiving department, where the inventory arrives and is logged in by a receiving clerk.
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