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Expenditure PDF Version

Expenditure PDF Version - Agenda Major Business Activities...

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3/2/2009 1 The Expenditure Cycle Agenda ¾ Major Business Activities and Key Decisions in the Expenditure Cycle ¾ The Major Threats and the Related Control Procedures in the Expenditure Cycle. Expenditure Cycle Business Activities • What are the five basic expenditure cycle business activities? 1 Requesting the purchase of needed goods 2 Ordering goods to be purchased 3 Receiving ordered goods 4 Approving vendor invoices for payment 5 Paying for goods purchased Inventory Control Recognize Need for Goods 1.0 Inventory Data Supplier (Vendor) Cash Disbursements Data Supplier Data Open Purchase Order Data Place Order for Goods 2.0 Receive Goods 3.0 Prepare Cash Disburse- ment 5.0 Inventory Status Data Purchase Requisition Purchase Order Header Info. Purchase Order Purchase Order Notification Purchase Order Purchase Order Packing Slip (with Goods) Check Check Voucher Check Voucher Disbursement Data (with supporting Receiving A Data-Flow Diagram Pertaining to A/P & Cash Disbursements Activity Ascertain Validity of Payable 4.0 Maintain Accounts Payable 6.0 Accounts Payable Records Prepare Reports 7.0 General Ledger Records Managers Accountants Supplier (Vendor) Documents) Supplier’s Invoice Supplier’s Invoice Accounts Payable Data Payables Data Check Voucher Summary Journal Voucher Data Summary Account Data Open Orders Report Check Register Performance Reports Cash Management Report Accounts Payable Aging Schedule Purchases analysis Report Supplier’s Invoice Slide 4 1. Request Goods • The first major business activity in the expenditure cycle involves the request to purchase inventory or supplies. The traditional inventory control method (often called economic order quantity [EOQ]) [EOQ]): –This approach is based on calculating an optimal order size so as to minimize the sum of ordering, carrying, and stockout costs. 2 A P S E.O.Q. = The Economic Order Quantity n Write-Off of Customer Balances A = Annual Quantity Used P = Cost of Placing One Order S = Annual Carrying Cost of One Unit of Inventory
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3/2/2009 2 Request Goods (Cont) Alternative inventory control methods: – MRP (material requirement planning) • This approach seeks to reduce required inventory levels by scheduling production, based on estimating sales needs. – JIT (just in time) • JIT systems attempt to minimize both carrying and stockout costs. Request Goods (Cont) • What is a major difference between MRP and JIT? • MRP systems schedule production to meet estimated sales need, thereby creating a stock of finished goods inventory. • JIT systems schedule production to meet customer demands, thereby virtually eliminating finished goods inventory. Request Goods (Cont) Documents and procedures: • The purchase requisition is a document that identifies the following: – requisitioner and item number specifies the delivery location and date – specifies the delivery location and date needed – specifies descriptions, quantity, and price of each item requested – may suggest a vendor Inventory Control (Accounting) Initiation
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Expenditure PDF Version - Agenda Major Business Activities...

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