1. EXPENDITURE CYCLE Chapter 13 Acquire Goods and Services Pay for Goods and Services Spring 2002

2. If the Expenditure Cycle Fails l Inventory is under-stocked. l Inventory is over-stocked. l Disbursements made for unauthorized purposes.

3. Cash Receipt Fraud

4. Cash Disbursement Fraud

5. Expenditure Cycle is Mirror of Revenue Cycle Revenue Cycle l Create Sales Order l Ship Goods l Send Invoice l Collect Cash Expenditure Cycle l Create PO l Receive Goods l Receive Invoice l Disburse Cash

6. Identify a Need l Need to know when to order »Reorder point, two bin system, MRP l Need to know what to order »EOQ, MRP, JIT l Needs identified outside of purchasing.

7. Approve Requisitions l Needs communicated to purchasing »Use purchase requisition (p. 470) l Purchasing reviews requisition »Proper approval »Within budgets

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

9. Create Purchase Order l Purchase order becomes contract between buyer and vendor. l P.O. example: p. 473 l System example: p. 474

10. Alternatives to POs l Procurement Cards »Focus 13.2 (p. 476) l Custom On-line Catalogues

11. Control Over Purchasing Agents l True Story: »Purchasing agent given Bulls tickets. »Purchasing agent given Weber grill. l What can be done to assure that purchasing agents engage in arms length transactions?

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

13. Deliver Goods l Route goods to warehouse or other departments. l End users sign for goods. l Examples: p. 478 & 479.

14. Approve Payment Purchase Order = Receiving Report = Invoice Approved Invoice Record liability. File by due date. }

15. Prepare & Make Disbursement l Cashier prepares check. l Treasurer »reviews supporting documentation before signing check. »signs check, cancels supporting documentation, and mails check l Record disbursement.

16. Summary Order Goods Receive Goods Approve Invoice Disburse Cash