Chapter 5

Expenditure Cycle
Purchasing and Cash Disbursements

For each document listed:

1. Highlight the important information
2. Describe why it is significant

 the name of the requestor

 the date of the request
 the items, actions or services requested for
 the date of delivery
 the location of the delivery
 the department in charge of making deliveries
 The signature of the requestor.
The benefits of using purchase requisitions
Besides the fact that it prevents fraud, there are several benefits to issuing purchase requisitions.
Here are a few:

1. You can avoid duplicate orders

If only one person would be in charge of making purchases, keeping track of orders would be
easy. But for larger organizations, purchase requisitions can keep track of what’s needed, by
whom, and when.

2. They are useful for financial audits

Some financial audits require evidence that managers approved the company’s purchasing
decisions. Purchase requisitions (as well as purchase orders) can be used as proof for these
audits.

3. They help you organize orders

This one’s pretty obvious, but having a well-organized purchase system makes it easy to identify
what products are coming in at any time. This makes inventory management a lot easier.

4. They prevent miscommunication

Purchase requisitions clearly communicate the details of a purchase. By having every aspect
clarified and written down, organizations can avoid potential conflict or confusion in the future.

5. They’re legal documentation

Even though purchase requisitions are internal documents, they can serve as legal documentation
that can be enforced should any issues over what was ordered or the agreed-upon price arise.

 PO number
 Purchase order date
  Vendor name and billing address
 Buyer name and shipping address
 Additional contact information, such as phone numbers and email addresses
 Delivery date
 Shipping method
 Shipping terms
 Item name
 Item description and technical information
 Item quantity
 Item unit cost
 Line total
 Taxes
 Total price
 Payment terms
They give you lawful insurance

Suppose your startup requested ten ergonomic seats from a seller, paid for them, however then
on conveyance day just nine seats showed up at your office. Who's to be faulted?

They make orders simpler to follow

Buy orders assist you with bettering record for the entirety of the products and ventures your
organization has requested, watch how you're paying for them, and track when they're showing
up.

They assist you with dodging review issues

On the off chance that you end up getting evaluated, you'll thank your previous self for making
buy orders. Why? Buy orders eliminate a great deal of worry from the examining cycle by
furnishing inspectors with a convincing review trail and a simple method to cross-check
solicitations and pressing slips.
Includes information from the PO, but it omits data about the price and quantity of the items
ordered
Purpose of the blind copy of purchase order

• The Blind copy of purchase order is reconciled with the goods received from the vendor. This
Blind copy of Purchase Order (PO) does not contain any information on the quantity of goods
and their pricing information.
• The blind copy of PO ensures that the receiving clerk physically counts the inventory and
inspects them before preparing the receiving report.
• If the receiving clerk is provided with the quantity of goods then there are chances of him
accepting the goods without actually counting it or even inspecting it. • In such scenario the
damaged or missing goods are also accepted and there by become the liability of the company. In
order to reduce this risk blind copy is an important control.
A receiving report is used to document the contents of a delivery to a business. The form is filled
out by the receiving staff of the business accepting the delivered goods. The following
information is typically included on a receiving report:
 Date and time on which the delivery was received
 Name of the shipping company that delivered the goods
 Name of each item received
 Quantity of each item received
 The authorizing purchase order number, if noted on the delivery documentation or box
 Condition of the items received. This can be a negative entry, where only damaged goods
are noted.
The receiving report can be used in several ways, including the following:
 Returns. If certain goods are to be returned, the receiving report documents the reason for
the return, such as damaged goods.
 Payables. The receiving report can be used as evidence of receipt in the three-way
matching process. This approach is more commonly used for larger-dollar purchases.
 Accruals. The accounting staff may use receiving reports that were completed near
month-end to accrue expenses for supplier invoices that have not yet arrived.
A subsidiary ledger is a special ledger designed to provide information about accounts that
would not normally be found in a general ledger. To remain in balance, the total of all accounts
listed in a subsidiary ledger must match the total summary balance that appears in the general
ledger. Subsidiary ledgers can be maintained on any account found in the general ledger,
including the inventory ledger.

Inventory Transactions
An inventory subsidiary ledger records transactions that effect inventory. A separate account is
created for each item offered for sale and contained in inventory. Each item can be tracked in
three column entries that record purchases, sales and account balances. Additional columns
can record adjustments for returns or other changes.

Inventory Systems
Periodic inventory systems transfer sales information from a "sales" or "purchases" account
into inventory subsidiary ledgers at regular intervals. Although sales are recorded continuously,
the inventory subsidiary accounts are normally updated monthly or quarterly. A perpetual
inventory system updates the inventory subsidiary ledger and modifies inventory quantities as
each transaction occurs. Perpetual or continuous inventory makes inventory management
more responsive to sales and market trends.
 Date column: Date column is used to record the date on which the invoice belonging to
goods purchased is received.
 Supplier column: The supplier’s name is written in this column. Some businesses also
include a brief description of goods purchased in this column.
 Invoice date column: The invoice date column is used to record the date on which the
invoice is prepared by the supplier.
 Payment terms column: This column is used to record the payment terms allowed by the
supplier.
 Reference column: At the end of each day, the entries from purchases journal are posted
to individual accounts in the accounts payable subsidiary ledger. If computer software is
used, these entries are immediately posted to subsidiary ledger. Reference column is used
to record the account numbers of the accounts to which the entries have been transferred.
If accounts are not numbered, the page number of accounts is recorded in this column.
 Accounts payable column: The amount payable on the invoice is recorded in this column.
 Items columns: These columns are used to enter the cost of individual items purchased
from suppliers such as inventory, store supplies, office supplies and equipment etc. The
number of item columns to be used on a purchases journal depends on the nature and
requirement of each individual business.
Number
Number used by the Office of Student Activities to identify this voucher.
Date
Write the date in the format month/day/year.
Payee
Indicate the name of the person who or the name of the business that is supposed to receive the
check.
Amount
State the amount that is being paid for the product or service. The amount written in this line
must be the same amount stated on the bill/invoice.
Club/Organization
Write the club/organization’s full name.
Budget Approved at Association Meeting
Write the date in which the budget for your organization was approved.
Budget Line
Circle the budget line from which your budget comes from.
Purpose of Disbursement
Write as much information as possible about the reason why you are requesting to use these
funds. If you have an invoice or order number, start with that information first.

Vouchers are necessary because they are a source document and a proof to every transaction that
has taken place in the business premises. If every transaction of the business were recorded, it
would mean that there is a voucher available as a proof to that transaction.

 The vendor's invoice.

 The company's purchase order.
 The company's receiving report.
 Payee/vendor name.
 Discount terms.
  Amount and date to be paid.
 General ledger account numbers to be charged.
 Authorizing signatures.

The voucher register is to vouchers like what a check register is to checks. It records all of the
vouchers that are approved, so management can look up and access the vouchers at a later date.
For instance, if a manager wanted to examine the purchase orders and invoices from a particular
supplier, he could look up the vouchers in the voucher register for that vendor and see what
purchases were approved on different dates throughout the period.

The format of the Cash Disbursement Journal is similar to the Cash Receipts Journal. The
two are sometimes joined into one Cash Books. The Cash Payment Journal has the
following columns:

 Date – the date of each cash payment

 Details – the name of the other ledger account affected (for creditors write the
creditor’s name)
 Check Number – issued by the business (run in sequential order)
 Bank – the total amount of cash paid, which will be allocated to one or more
columns on the right
 Creditor control – a column on the right reflecting the total amount deducted from
the creditor’s account
 Stock control – a column on the right reflecting the cost of the stock purchased
with cash
 Special columns – these will vary depending on the nature of each business
(Advertising, Wages, Drawings, Discounts Received, etc.)
 GST – the goods and services taxes paid on transactions
 Other columns – for anything that does not fall into specific categories.
Record Information in the Cash Payment Journal
Since the cash is decreased, we will need the other account besides our Cash account to
reflect it. In other words, this will be the debit side of the cash disbursement transaction.
Update Subsidiary Ledger 
Our next step would be to update the Subsidiary Ledger.
Update General Ledger 
We will use the Cash Payment Journal totals to update the General Ledger accounts,
making sure that debits equal credits.
Cash Payment Journal and Discounts Received
Some companies include discounts received column in the Cash Payment Journal.

Time Is Important:
As any successful employer will understand, time is a valuable commodity and any way to
reduce the length of a task without compromising the quality with which it is carried out should
be examined carefully.
Cut 90% of Applicants:
The screening process is both time and resource efficient because of the incredible number of
applicants that you can discard as unsuitable.
Generate Questions:
Applications can be a great source of inspiration for interesting interview questions, particularly
if you receive a fascinating application. The number of employees who tailor their answers to
meet the demands of the job and consequently submit exciting applications may be low, but
when employers do stumble across them, they are often a gold mine of information.
Lower Employee Turnover:
One of the major recruitment problems experienced by businesses is finding employees that will
end up staying on board for any serious length of time. A high turnover in a company means that
they have to spend valuable time, resources and money running recruitment programs, training
new employees and guiding them through the induction phase when they won’t be at their most
efficient.
Protect The Workplace:
In some cases, new employees can be an extremely destabilizing force in the workplace. This
may be due to a poor work ethic, a troublesome personality or an inability to work as part of a
team.

Virtual Access Points (VAP) are a usually used technique to communicate administration set
identifiers (SSID) with various benefit levels from a similar passage (AP). While research has
been centered around making sure about data sent utilizing the IEEE 802.11 norm and the
confirmation of clients on remote neighborhood (WLAN), little consideration has been given to
the security of VAPs used on APs to decide if the presence of a less-favored, less-made sure
about SSID is a security weakness for the AP that has it. In this postulation, we gathered guide
outlines from VAPs facilitated on WLAN APs and endeavored to relate VAPs utilizing chart
hypothesis and signal edge qualities. We found that it is conceivable to relate guide outlines
utilizing the reference point outline timestamp and, less significantly, the got signal quality
pointer.
Inherent risks associated to expenditure cycle
Possibility of management override
Collusion
Errors due to fatigue or misunderstanding
Failure to adapt to control structure.
Controls applying to expenditure cycle
•Prenumbered purchase orders
•Authorised personnel to initiate all purchases
•Deliveries accepted on verification of purchase order
•Invoices, purchase orders and receiving reports matched to verify invoice for processing and
payment
•Expected refunds are followed up
•Paid invoices are cancelled with a stamp – ‘paid’ or punch
•Cheque signatories have limits
•Authorised person responsible for petty cash fund
•Accounts payable is reconciled on a regular basis
•Inventory is protected and accounted for both physically and in terms of dollar value
•Reorder levels are maintained
•Proper authorisation procedures apply for release of goods from stores
Accounts associated with expenditure cycle
Purchase accounts
Cash Accounts.