Objectives for Chapter 5

 Fundamental tasks performed during purchases and cash

disbursement processes
 Functional areas involved in purchases and cash
disbursements and the flow of these transactions through
the organization
 Documents, journals, and accounts that provide audit trails,
promote the maintenance of records, and support decision
making and financial reporting
 Risks associated with purchase and cash disbursements
activities and the controls that reduce these risks
 Operational features and the control implications of
technology used in purchases and cash disbursement
systems

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 Organization of Chapter 5
 The conceptual expenditure cycle
 The physical expenditure cycle
 Basic technology system
 Advanced technology system
 Reengineering using EDI
 Address functionality, efficiency issues, work flow characteristics and
Internal control issues in each system at different points on the
technology/human continuum

Conceptual Expenditure Cycle

• Purchase processing
• Vouchers payable system
• Cash disbursement system
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 Purchase Processing
 Monitor inventory records
 Prepare purchase order
 Receive goods
 Update inventory records
 Set up accounts payable

Vouchers Payable System

• An alternate to AP procedures
• Uses cash disbursement vouchers
• Each voucher recorded in the voucher register
• Post to general ledger
• inventory and voucher control accounts 3