The acquisition cycle covers the purchase, receipt, payment, and

accounting for goods and services.

Major accounts include:

- purchases
- purchase returns and allowances
- purchase discounts
- cash in bank
- accounts payable
- property, plant, and equipment
- prepaid expenses
- manufacturing, administrative,
- selling expenses
 Business functions in the acquisition and
payments cycle

The acquisition cycle covers the fallowing classes of

transactions:
1. Acquisitions of goods and services
2. Cash disbursements
3. Purchase returns and allowances and
purchase discounts
Business functions, documents and records
in the acquisition and payments cycle,

Requisition goods or services

• Initiation of a purchase requisition by an authorized employee
– Pre-numbered requisition form completed and sent to purchasing
Purchase goods or services
• Purchase order shows quantity and price of goods ordered, quality
specifications, shipping terms
• Purchase orders are pre-numbered to establish completeness
• Purchase orders must be properly authorized
• Many companies have separate purchasing department:
– Agents job is to find best combination of price, service, and quality
– Reduces fraud by separating purchasing from custody and recording
– Centralizes control in one location
– Controls set to stop purchasing agents from abusing their positions
 Business functions, documents and
records in the acquisition and payments
cycle,
Approve payment
•Accounting matches vendor invoice, purchase
order, and receiving reports - If quality and
quantity match, account payable is recorded
Cash disbursement
•Supporting documentation is reviewed and
approved for payment
Documents are marked "paid" to avoid
duplicate payment