NAME: Jerome A.

Monserrat DATE: October 10, 2022

SECTION: BSA 2D

Chapter 5:
1. Differentiate between a purchase requisition and purchase order.
Purchase Requisition is the document that authorizes a purchase transaction. It is a written
request, usually sent to inform the purchasing department of a need for materials or supplies.
Purchase Order is a document based on a purchase requisition that specifies items ordered from
a vendor or supplier.

2. What are the three logical steps of cash disbursement system?

1) The program retrieves a single record from the unedited transaction file and stores it in
memory.
2) The first logical test is to see if the program has reached the end-of-file (EOF) condition
for the transaction file. Most file structures use a special record or marker to indicate an
EOF condition. When EOF is reached, the edit program will terminate and the next
program in the system (in this case, the update program) will be executed. As long as
there is a record in the unedited transaction file, the result of the EOF test will be ‘‘no’’
and process control is passed to the next logical step in the edit program.
3) Processing involves a series of tests to identify certain clerical and logical errors. Each
test, represented by a decision symbol, evaluates the presence or absence of a condition.
For example, an edit test could be to detect the presence of alphabetic data in a field
that should contain only numeric data.

3. What is the purpose of the blind copy of a purchase order?

The purpose of the blind copy is to force the receiving clerk to count and inspect inventories
prior to completing the receiving report.

4. Explain each step of Purchases Processing Procedures (Conceptual System)

i. Monitor Inventory Records
Companies reduce their inventories by putting raw materials through the
conversion cycle (the production process) and selling completed goods to customers
(revenue cycle). The buy process is started by preparing a purchase requisition and
sending it to the function that prepares purchase orders when inventories reach a
predefined reorder point.

ii. Prepare purchase order

A purchase order (PO) is created for each vendor after receiving the purchase
request and is sent to the supplier. Additionally, a copy is sent to the function that sets up
accounts payable (AP) so that it can be temporarily filed in the AP pending file. A blind
copy is also given to the function that receives products so that it can be held there until
the inventories arrive. The final copy is kept in the purchase order file, open or closed.
iii. Receive Goods
The receipt of the inventory comes next in the expenditure cycle. The blind copy
of the PO is compared to the goods that the vendor has delivered. The products being
received are not mentioned in the blind copy in terms of quantity or price. The blind copy
is intended to compel the receiving clerk to count and review inventories before
submitting the receiving report.

iv. Update inventory records

Regardless of the amount that was actually paid to the vendor, organizations that
adopt a standard cost method carry their inventory at a predetermined standard value. A
simple cost inventory ledger just needs to know the quantities that were received to be
posted. The receiving report serves this purpose because it includes quantity information.
A copy of the supplier's invoice as it comes in is one of the supplementary pieces of
information needed to update an actual cost inventory ledger.

v. Set up accounts payable

Accountants must be conscious of the possibility of unrecorded liabilities at
period end close because the receipt of the invoice normally initiates AP procedures. The
AP clerk compares the financial data on the invoice to the receiving report and PO in the
pending file. This process, known as a "three-way match," confirms that the item
purchased was delivered and is reasonably priced. The transaction is entered into the
purchasing journal and posted to the supplier's account in the AP subsidiary ledger once
the reconciliation is finished.

vi. Post to general ledger

An account summary from inventory control and a journal voucher from the
accounts payable department are sent to the general ledger function. The general ledger
function reconciles the inventory subsidiary summary and the inventory control account
and sends the journal voucher to the AP and inventory control accounts. After that, the
journal voucher file receives the approved journal vouchers. This action concludes the
expenditure cycle's acquisitions phase.