4A. Purchase Requisitions We better order these!A purchase requisition is an internal document created to request the procurement of something.They originate in stores or other departments within an organization.
5We will get these from Acme, Co. B. Purchase OrdersWe will get these from Acme, Co.Purchasing selects a vendor, then prepares a purchase order for the requisitioned goods.The purchase order identifies the vendor, confirms the goods ordered, quantity, price, delivery date, and payment terms.
6C. Receiving ReportsPurchase orders authorize the receiving department to accept delivery from a vendor.Blind counts help ensure that receiving actually count the goods received.A receiving report summarizes the goods received and accompanies them to stores.
7D. Voucher SystemsThe real control over disbursements is a final review of documents evidencing the entire transaction prior to authorization of payment.In a strict voucher payable system, individual accounts for creditors need not be kept. Several vouchers may relate to the same creditor, as opposed to a single account in an accounts payable system.A voucher shows, among other things, the name and address of the vendor, a description of the invoice, total or net amount due, and accounts to be charged (distribution).Built-up voucher systems accumulate several invoices from the same vendor and pay these invoices with a single check.
8E. Invoice Verification Invoices must be checked against receiving reports and original purchase orders prior to payment.Payment should only be approved when the above documents match, or the invoice has been satisfactorily reconciled to the other documents.
9II. The Expenditure Cycle Requisitioning in StoresOrder Processing in PurchasingReceivingDelivery Acknowledgement in StoresInvoice Verification in PurchasingAccounts Payable Prepares the Voucher PackageCash DisbursementsGeneral LedgerInternal Audit
10A. Requisitioning in Stores Requests for purchases originate outside the purchasing department.Purchase requisitions arise in stores or other departments.Requisitions should be approved in the originating department.Purchasing has access to the requisition thru the purchase database.PrepareRequisitionProcessingPurchaseDatabase
11B. Order Processing in Purchasing Purchase requisitions may be overridden due to a lack of funds, improper authorization by the requesting department, etc.Purchasing selects a vendor using an approved vendor list or a bidding process.Accounts payable, the requesting department, and receiving all have access to the purchase order through the purchase database.PrepareOrderPurchaseRequisitionSelectVendorProcessingTo VendorDatabaseRetrieve
12Stores has access to this report thru the purchase database. RetrieveOrderFrom VendorDeliveryMatch toProcessingBlindCountEnterReceiptTo StoresC. ReceivingReceiving accesses the purchase order and matches it with the vendor delivery.Receiving only accepts deliveries for which there is an existing purchase order.Blind counts are often used to force counters to actually count the items received.A receiving supervisor later verifies the quantity against the purchase order.Stores has access to this report thru the purchase database.
13D. Delivery Acknowledgement in Stores PurchaseDatabaseRetrieveReceivingReportMatch toDeliveryFrom ReceivingGoodsReceiptProcessingThe stores department acknowledges receipt of the delivery on the receiving report in the purchase database.Purchasing and accounts payable have access to the acknowledged report thru the purchase database.
14E. Invoice Verification in Purchasing From VendorVendorInvoiceVerificationPurchaseDatabaseTo Accounts PayablePurchasing uses the purchase database to compare the purchase order, acknowledged receiving report, and vendor invoice for any discrepancies.Purchasing authorizes the invoice for payment once they are satisfied that the invoice is correct per the order and what was received.
15F. Accounts Payable Prepares the Voucher Package From PurchasingVendorInvoicePurchaseDatabaseRetrieveDocumentsRequisitionOrderReceivingReportPrepareVoucherProcessingAccountsPayableorRegisterCheckJournalTo Cash DisbursementsTo General LedgerThe purchase requisition, purchase order, acknowledged receiving report, and approved vendor invoice provide the support for the preparation of a voucher.The voucher serves to summarize the purchase for entry on the records as a liability.
16Cancel Voucher after Signing Check G. Cash DisbursementsFrom Accounts PayableVoucherCheckSignChecksCancel Voucher after Signing CheckPostRegisterControlTotalForward to PayeeTo General LedgerCash disbursements received the voucher package and check for signing.Cash disbursements maintains a check register and forwards a journal entry to general ledger.
17From Cash Disbursements H. General LedgerFrom Cash DisbursementsControlTotalFrom Accounts PayableJournalVoucherComparePostGeneralLedgerProcessingGeneral ledger receives the journal entry from accounts payable (Debit – Accounts payable and Credit – Cash) and compares it to the control total for cash disbursements.The journal entry is then posted into the general ledger.
18I. Internal AuditBankReconciliationStatementCancelledChecksFrom BankCheckRegisterAn independent reconciliation of the bank account is performed by internal audit.
19Other Payroll Features III. Payroll ConceptsPersonnelTimekeepingPayrollOther Payroll FeaturesTax Forms
20A. PersonnelPersonnel is responsible for placing people on the payroll, specifying rates of pay, authorizing deductions, and any changes payroll items.The personnel function is distinct from timekeeping and payroll preparation.
21B. TimekeepingTimekeeping is responsible for the preparation and control of time reports and job time tickets.Timekeeping reconciles employee hours to job time summary reports received from production.
22C. PayrollThe payroll department is responsible for the actual computation and preparation of payroll.It should be noted that payroll is independent of timekeeping and personnel.
23D. Other Payroll Features Separate imprest payroll account to facilitate reconciliations.Independent reconciliation of payroll bank account.Independent paymaster distributes checks (i.e. independent of personnel, timekeeping, and payroll).
24E. Tax FormsForm 941 – Quarterly filing summarizing federal withholding, social security, and medicare taxes.Form W-2 – On or before Jan 31 an employee must provide employees with this wage and tax statement.Form W-3 – Summary form that accompanies copies of Forms W-2 sent to the federal government on or before Feb. 28.Form 1099 Misc – Documents contract services over a certain amount in a given year.Earnings statement – Statement summarizing payroll computations for an employees pay check.
25IV. The Payroll Application System The Role of PersonnelPayroll ProcessingInternal Audit and the Bank Reconciliation
26A. The Role of PersonnelThe authorization for placing people on the payroll should be separated from the record keeping that payroll performs.PersonnelPayrollAuthorizationandNotification
27Check is signed and deposited in imprest payroll bank account B. Payroll Processing2Cash DisbursementTimekeepingCost DistributionPayrollAccounts PayableGeneral LedgerJob TimeSummaryFrom ProductionPayroll DistributionJournalVoucherEmployeeTime CardsReconcileRegisterCheck1Check is signed and deposited in imprest payroll bank accountCompare
28C. Internal Audit and the Bank Reconciliation Internal audit received information directly from the bank and performs an independent reconciliation of the payroll bank account.BankInternal AuditDepositSlips andChecksStatement
29Summary Forms used in the expenditure cycle Steps of the expenditure cyclePayroll dutiesPossible Payroll FeaturesPayroll FormsSteps in the payroll cycle