Key Words

Blanket Purchase Order or blanket order is a commitment to purchase

specified items at designated prices from a specific supplier for a given period,
often one year.
Debit Memo is a document used to record a reduction to the balance due to a
supplier.
Disbursement Voucher – It identifies the supplier, outstanding invoices, and
the net amount to be paid after deducting any applicable discounts and
allowances.
Evaluated Receipt Settlement (ERS) – An invoice less approach to accounts
payable that replaces the three-way matching process (supplier invoice,
receiving the report, and purchase order) with a two-way match of the
purchase order and receiving the report.
 Key Words
Expenditure Cycle It is a recurring set of business activities and related data
processing operations associated with the purchase and payment for goods
and services.
Non-voucher System is a method for processing accounts payable in which
each approved invoice is posted directly to individual supplier records in the AP
file. Then, they are stored in an open invoice file. Contrast with the voucher
system.
Procurement Card - A corporate credit card that employees can use only at
designated suppliers to purchase specific kinds of items.
Purchase Order is a document that formally requests a supplier to sell and
deliver specified products at designated prices. It is a promise to pay and
becomes a contract once the supplier accepts it.
 Key Words
Purchase Requisition - It is a document or electronic form that identifies the
requisitioner and the requested goods. It shows the delivery location, the date
needed. It also identifies the item numbers, descriptions, quantity, and price of
each item requested; and may suggest a supplier.
Receiving Report is a document that records details about each delivery, including
the date received, shipper, supplier, quantity received.
Voucher Package - The set of documents used to authorize payment to a supplier.
It consists of a purchase order, receiving the report, and supplier invoice.

Voucher System - It is a method for processing accounts payable in which a

disbursement voucher is prepared. It identifies the supplier, lists the outstanding
invoices, and indicates the net amount to be paid after deducting any applicable
discounts and allowances. It is in contrast with the non-voucher system.
Is a recurring activity associated with the purchase
of goods and payment for goods and services.

In the expenditure cycle, vendors are the primary

external exchange of information.

Information flows from the revenue, production, Expenditure

inventory control, and various departments to the
expenditure cycle. Cycle
Notification of receipt flows back to the sources,
once the goods and materials arrive.

Expense data flows from the expenditure cycle to

the GLFRS for inclusion in financial statements and
various management reports.
 Expenditure Cycle Activity
Four Primary Activities in the Expenditure Cycle

• Ordering – materials, supplies, and services – send order to suppliers

• Receiving – receive merchandise or services from suppliers (inbound logistics)
• The receiving clerk compares the PO number on the packing slip with the open
PO file when the goods arrive to verify the products were ordered. Then he
counts the goods and examines them if there are damages before routing them
to the warehouse or factory
• The are three possible exceptions in this process: (1) the quantity of goods is
different from the amount ordered; (2) the goods are damaged; and (3) the
products are of inferior quality
• Processing Invoices – review and approve invoices from suppliers
• Cash Disbursements – process payments to suppliers

Minimizing the total cost of acquiring inventories

is the primary objective of the expenditure cycle
 Documents used in the Expenditure Cycle
Activities Documents
Ordering of Goods Requisition Slip
Purchase Order (PO)
Receiving of Goods Receiving Report (RR)
Processing of Invoices Voucher Package
Invoice
Voucher and Non-Voucher System
Debit Memo
Cash Disbursements Check
Disbursement Voucher
 Organizational Chart
CEO

VP
CFO
Manufacturing

Purchasing Receiving Controller Treasurer

Inventory Accounts
Cashier
Stores Payable