EXPENDITURE CYCLE

1
EXPENDITURE CYCLE

• Chapter 13
• Acquire Goods and Services
• Pay for Goods and Services
• Spring 2002

2
If the Expenditure Cycle Fails

• Inventory is under-stocked.
• Inventory is over-stocked.
• Disbursements made for unauthorized purposes.

3
Cash Receipt Fraud
4
Cash Disbursement Fraud
5
Expenditure Cycle is Mirror of Revenue Cycle

• Revenue Cycle
• Create Sales Order
• Ship Goods
• Send Invoice
• Collect Cash

• Expenditure Cycle
• Create PO
• Receive Goods
• Receive Invoice
• Disburse Cash

6
Identify a Need

• Need to know when to order
• Reorder point, two bin system, MRP
• Need to know what to order
• EOQ, MRP, JIT
• Needs identified outside of purchasing.

7
Approve Requisitions

• Needs communicated to purchasing
• Use purchase requisition (p. 470)
• Purchasing reviews requisition
• Proper approval
• Within budgets

8
Select Vendor

• Use approved vendor list.
• You get what you pay for!
• 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

• Purchase order becomes contract between buyer and
  vendor.
• P.O. example p. 473
• System example p. 474

10
Alternatives to POs

• Procurement Cards
• Focus 13.2 (p. 476)
• Custom On-line Catalogues

11
Control Over Purchasing Agents

• True Story
• Purchasing agent given Bulls tickets.
• Purchasing agent given Weber grill.
• What can be done to assure that purchasing agents
  engage in arms length transactions?

12
Receive Goods

• Count compare to packing slip P.O.
• Test basis?
• May also use a blind P.O.
• Inspect quality.
• Document on receiving report.

13
Deliver Goods

• Route goods to warehouse or other departments.
• End users sign for goods.
• Examples p. 478 479.

14
Approve Payment

• Purchase Order
• Receiving Report
• Invoice

Approved Invoice
Record liability. File by due date.
15
Prepare Make Disbursement

• Cashier prepares check.
• Treasurer
• reviews supporting documentation before signing
  check.
• signs check, cancels supporting documentation,
  and mails check
• Record disbursement.

16
Summary
Order Goods
Receive Goods
Approve Invoice
Disburse Cash