AIS FINAL REVIEWER  prepares the check

 Records the information in a check register (cash disbursements

Goals of the Expenditure Cycle journal)
 G/L department receives:
The goal of providing needed resources to organization can be broken down
 the journal voucher from cash disbursements
into several objectives:
✓ The accounts payable control account is reconciled with the
 purchase from reliable vendors
subsidiary summary.
 purchase high quality items
 obtain best possible price Computer-Based Accounting Systems
 purchase only items that are properly authorized
 have resources available when they are needed  CBAS technology can be viewed as a continuum with two extremes:
 receive only those items ordered  automation - use technology to improve efficiency and
 ensure items are not lost, stolen, or broken effectiveness
 pay for the items in a timely manner  reengineering – use technology to restructure business processes
and firm organization
A Manual Purchases System
Expenditure Cycle Database
 Begins in Inventory Control when inventory levels drop to reorder
levels  Master Files
 A purchase requisition (PR) is prepared and copies to send to  supplier (vendor) master file
Purchasing and Accounts Payable (A/P)  accounts payable master file
 Purchasing prepares a purchase order (PO) for each vendor and  merchandise inventory master file
sends copies to Inventory Control, A/P, and Receiving  Transaction and Open Document Files
 A/P also prepares a cash disbursements voucher and posts it in the  purchase order file
voucher register.  open purchase order file
 G/L department: posts from the accounts payable journal voucher  supplier’s invoice file
to the general ledger  Other Files o supplier reference and history file o buyer file
 reconciles the inventory amount with the account summary accounts payable detail file
received from inventory control
Computer-Based Purchases
Manual Cash Disbursements System  A Data Processing dept. performs routine accounting tasks.
 Periodically, A/P searches the open vouchers payable file for items  Purchasing - a computer program identifies inventory
with payments due: requirements
 A/P sends the voucher and supporting document to Cash  Tasks performed automatically by the computer:
Disbursements  the system scans for vouchers currently due
 A/P updates the accounts payable subsidiary ledger  prints check for these vouchers
 Cash Disbursements:
  Warehouse (stores)
 Inventory control
 Accounts payable
 General ledger
 Requisitioning
General Internal Controls  Purchases
 Organization controls  Purchases returns and allowances
o segregation of duties  Cash disbursements
 Documentation
 Asset Accountability Controls
Manual Segregation of Functions
 Management Practices  Custody of the asset, inventory, by the Warehouse must be
 Data Center Operations Controls separate from recordkeeping for the assets by the Inventory
 Authorization Controls Control
 Access Controls
Computer-Based Segregation of Functions
Manual Authorization Controls
 Extensive consolidation by the computer of tasks traditionally
 Purchases of inventory should be authorized by the Inventory
segregated
Control department, not by purchasing agents
 Accounts Payable authorizes the payments of bills, not the cash Manual Supervision
disbursements clerk, who writes the checks
 Within the expenditure cycle, supervision is of highest
Computer-Based Authorization Controls importance in the Receiving department, where the inventory
 Authorizations are automated. arrives and is logged in by a receiving clerk
 programmed decision rules must be debugged
 Automating inventory in EDI and JIT
 faulty inventory model can lead to over-purchasing or under
purchasing
 Cash disbursements may automate check printing and
signing.
 programming logic must be flawless

Traditional Segregation of Duties

The Expenditure Cycle, part 2