The Acquisition Purchasing Cycle

1
The Acquisition (Purchasing) Cycle

• Consult with suppliers
• Process requisitions
• Develop agreements with suppliers to purchase
  good or services in the future
• Receive goods or services from suppliers
• Recognize claims for goods and services received
• Select invoices for payment
• Write checks

Chapter 9
Chapter 10
2
Invoice and Payment Events
Record supplier invoice (E6)The supplier sends1
a purchase invoice to the Accounts Payable
Department. Every week, the accounts payable
clerk assembles2 a batch of the weeks invoices,
counts3 the number of invoices in the batch, and
calculates4 the dollar totals of the invoices in
the hash totals of the Supplier invoices. The
clerk compares5 each invoice to the purchase
order and receiving information in the computer
system. If a valid obligation to the supplier
exists, the clerk enters6 the purchase invoice
into the
3
Invoice and Payment Events
Record supplier invoice (E6)computer. The
computer stores7 the data in the Invoice File.
After the batch is entered, the accounts payable
clerk prints8 the purchases journal. The clerk
reviews9 the purchases journal and compares the
total on the purchases journal to the calculated
batch total. The clerk makes10 any corrections
required to the invoice information. Then the
clerk selects11 the Post option for posting
purchase data on the computer system. The
computer adds12 records to the General_Ledger_Tran
sfer Table and updates the balance due in the
Supplier Table. It also sets13 the Post_Date
field in the Invoice Table to the current
date. Record supplier invoice (E7)Weekly, the
company pays its bills. The accounts payable
clerk prints14 an open payables report to get a
list of all unpaid bills. Based on the due date
and discount date, the accounts payable clerk
selects15 invoices for payment. The computer
sets16 the To_Pay field in the invoice record to
Yes. Then the clerk prints17 a cash
requirements report that includes a list of bills
selected for payment and the amount of cash
needed to pay these bills.
4
Invoice and Payment Events
Approve payment (E8) The clerk gives18 the cash
requirements report to the controller. The
controller approves19 payment of the selected
bills. Prepare checks (E9) It needed, the clerk
makes20 changes to the invoices selected. The
accounts payable clerk then prints21 the checks.
The computer records22 the cash payments in a
Payment Table and sets23 the Paid field in the
invoice to Yes. Sign checks (E10) The clerk
gives24 the checks to the controller. The
controller signs25 them. Complete Payment
(E11) The clerk mails26 the checks to the
suppliers. The clerk prints27 a cash payment
journal. She selects the option to post28 the
cash payments to the ledger. The computer
updates29 the General_Ledger_Transfer Table and
the balance due in the Supplier Table. It sets30
the Post_Date field in the payment record to the
current date.
5
Invoice and Payment Workflow Table
6
Overview Activity Diagram
I Invoice (in progress)
Send Invoice
Supplier
C Cash Required
CH Checks
Record Supplier Invoice (E6)
Select Invoices for Payment (E7)
Prepare Checks (E9)
Complete Payment and Post (E11)
A/P Clerk
Approve Payment (E8)
Sign Checks (E10)
Controller
Computer
I Invoice
R Receipt
S Supplier
I Invoice
S Supplier
GL G/L
PY Payment
PO Purchase Order
GL G/L Transfer
7
Events and Tables
8
UML Diagram
All Event/Agent Cardinalities are (m,1)
Employee (requestor)
Employee (manager)
(E3) Requisition
Employee (purch. off.)
Inventory
(E4) Purchase Order
Supplier
(E5)Receipt
All G/L Inventory Cardinalities are (m,m)
Employee (rec. clerk)
(E6) Invoice
G/L Transfer
Employee (A/P clerk)
(E9, E11)Payment
Employee (controller)
9
Files

• Master Supplier and Employee Table from Chapter
  9
• Transaction Same as before, and

Invoice Table
Invoice_Detail Table
Payment Table
Payment_Detail Table
10
Invoices and Payments Risks and Controls

• Execution Risks
• Cash not paid or paid late
• E6 invoice recorded late
• E7 invoice not selected for payment at correct
  time
• E8 invoice not approved for payment by
  controller at right time
• E9 check not printed
• E10 check not signed
• E11 check misplaced or not mailed
• Wrong amount paid
• Supplier invoice is incorrect, or incorrectly
  entered
• Program should match entered amount to check
• Payment made after discount date

11
Invoices and Payments IS Risks

• Information Systems Risks
• Recording risks (transactions files)
• E6 wrong supplier info recorded leads to payment
  error
• E9 wrong supplier recorded on checks or wrong
  amount
• Update risks (master files)
• E6, E11 wrong supplier information updated

12
Invoices and Payments Workflow Controls

• Segregation of duties
• A/P clerk cant record invoice unless theres an
  approved PO
• A/P clerk cant sign checks (controller)
• Required sequence of events
• Invoices should only be recorded when valid PO
  sent out
• Using information from prior events
• A/P clerk checks PO
• Controller reviews invoices before payment
• Follow up on events
• Should check for pending invoices

13
Invoices and Payments Workflow Controls

• Recording accountable employees
• Record A/P clerk ID for each invoice record
• Limit access to data and assets
• Passwords for system
• Access to blank checks
• Prenumbered checks
• Helps control blank check issue as well
• Reconciliation of assets and system data
• Bank statement reconciliation

14
Acquisition Cycle Menu
15
Record Purchase Inventory (E6)

• Batch processing
• Step 1 Accumulate a batch of invoices (weekly)
• Step 2 Enter each invoice
• Step 3 Print an edit report (summary of entered
  events)
• Event reports that impact general ledger called
  journals
• Step 4 Review report and make corrections
• Step 5 Post the batch
• post date of invoice records recorded
• remove records from purchase journal
• records available for open payables report
• balance due for a supplier is updated
• create general ledger transfer table to update
  G/L master

16
Record Purchase Inventory (E6)

• Audit trail
• Risks and Controls
• Event that never occurs is recorded
• Only valid invoices allowed to be entered
• Invoice not records, recorded late, or recorded
  twice
• Check batch record count and check totals
• Compare entered invoice supplier to other open
  suppliers
• Invoice data not accurate
• Input controls for most fields

Purchase Invoice Voucher 459 05/26
Purchase Journal G/L Transfer 05/29
Requisition 1077 05/15
PO 599 05/17
Receipt 1405 05/26
Updated G/L
Balance Sheet
17
Select Invoices for Payment (E7)

• Print an open payables report
• What should the order of open payables be?
• Select invoices for payment
• Manual or automatic?
• Print a cash requirements report
• Execution Risks
• Only change in transactions tables is marking
  To_Pay field
• Main risk is missing a payment
• Only display unpaid bills
• Software makes recommendations based on date,
  discount date, due date and amount to be paid

18
Prepare Checks (E9)

• Controlling Risks
• Segregation of duties
• A/P clerk prints and mails but controller signs
• Required sequence of events
• Do not allow a check to be printed for
  non-existent PO
• Limited access
• Watch the blank checks
• Pre-numbered checks
• Positive pay system
• Send bank a list of valid checks and only those
  are allowed to clear
• Use electronic fund transfer (EFT) to increase
  efficiency

19
End of Period Activities

• Print accounts payable ledger
• Outstanding invoices for all suppliers
• Purge records
• Move offline and then delete transactions we
  dont need