11 - Chapter 11 The Expenditure Cycle The Learning...

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Unformatted text preview: Chapter 11 The Expenditure Cycle The Learning Objectives Learning Describe the basic activities performed in the Describe expenditure cycle expenditure Describe the key decisions of the expenditure Describe cycle cycle Develop an understanding of the operation of Develop the business cycle the Identify major threats and related controls The AIS and Its Subsystems The FINANCING CYCLE Get Get cash cash Funds Give Give cash cash Funds REVENUE CYCLE Give Give goods goods Get Get cash cash Data Funds Data EXPENDITURE CYCLE Give Give cash cash Data Get Get goods goods General Ledger & Reporting System Data Data Finished goods Labor Raw materials HUMAN RESOURCES CYCLE give give cash cash get get labor labor PRODUCTION CYCLE Give Give F/G F/G Get Get MLO MLO Basic Activities Basic Ordering Receiving Paying for Goods, Supplies, & Services Purchasing Cycle Timeline Purchasing Internal Requisition Requisition Issue Issue PO Receive Goods Receive Invoice Issue Payment Expenditure Cycle Context Diagram Expenditure Expenditure Cycle Level 0 DFD Expenditure Expenditure Cycle Level 1 DFD Expenditure Expenditure Cycle Level 1 DFD Expenditure Ordering Goods Ordering EOQ systems – the optimal order size minimizes • Ordering costs • Carrying costs • Stockout costs MRP systems – reduce inventory by • Scheduling production according to a master schedule • Rather than estimating needs JIT systems – reduce inventory by • Minimizing or eliminating safety stocks of RM, WIP, FG • Inventory arrives at the time needed Receiving and Storing Goods Receiving Receiving report is the primary document • Date, vendor, shipper, PO number • Item descriptions, units of measure (quantities obliterated) • Authorization by receiver and inspector • Must have a valid PO Exceptions • Quantity different from amount ordered • Damaged goods • Different quality • Debit memo for returns and price adjustments Paying for Goods and Services Paying Approve vendor invoices • • A legal obligation to pay arises at the time of receipt But most often the liability is recorded only after receipt & invoice approval Nonvoucher system • Approved invoices posted to supplier records in AP file & stored in open invoice file • Check is written, invoice is removed from open file, marked paid, stored in paid invoice file Methods • • Voucher system • Disbursements voucher identifies supplier, outstanding invoices, amounts to be paid (net of Disbursements discounts & allowances), & accounts to be debited discounts • Several invoices can be paid on one voucher • Prenumbered vouchers for control • Separates approval from payment for greater efficiency Review the Documents in R&S Review Purchase Requisition Purchase Order Receiving Report Payment Voucher Debit Memorandum Etc. Control Objectives Control All transactions are properly authorized All transactions are valid (occurred) All valid, authorized transactions are recorded All transactions are recorded accurately Assets (cash, inventory, & data) are safeguarded from Assets loss or theft loss Business activities are performed efficiently and Business effectively effectively REVIEW FLOWCHARTS REVIEW (handouts) END OF CHAPTER 11 END ...
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