Midterm Topic 2- Computer Based Purchases AND CASH Disbursement Applications PDF

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COMPUTER- BASED PURCHASES AND CASH DISBURSEMENTS APPLICATIONAUTOMATING PURCHASES USING BATCH PROCESSING TECHNOLOGYDATA PROCESSING DERPARTMENT: STEP 1 The purchasing process begins in the data processing department, where the inventory control function is performed.  When inventories are reduced by...

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COMPUTER- BASED PURCHASES AND CASH DISBURSEMENTS APPLICATION AUTOMATING PURCHASES USING BATCH PROCESSING TECHNOLOGY DATA PROCESSING DERPARTMENT: STEP 1  The purchasing process begins in the data processing department, where the inventory control function is performed.  When inventories are reduced by sales to customers or usage in production, the system determines if the affected items in the inventory subsidiary file have fallen to their reorder points.  The information needed to create the requisition record is selected from the inventory subsidiary record, which is then flagged “On Order” to prevent the item from being ordered again before the current order arrives.  At the end of the day, the system sorts the open purchase requisition file by vendor number and consolidates multiple items from the same vendor onto a single requisition.  Next, vendor mailing information is retrieved from the valid vendor file to produce hard copy purchase requisition documents, which go to the purchasing department. PURCHASING DEPARTMENT  Upon receipt of the purchase requisition, the purchasing department prepares a multipart PO. Copies are sent to the vendor, AP, receiving, data processing, and the purchasing department’s file.

DATA PROCESSING DEPARTMENT: STEP 2  A copy of the PO is sent to data processing and used to create a record in the open PO file. The associated requisitions are then transferred from the open purchase requisition file to the closed purchase requisition file. RECEIVING DEPARTMENT  When the goods arrive from vendors, the receiving clerk prepares a receiving report and sends copies to the stores (with the goods), purchasing AP, and data processing.

DATA PROCESSING DEPARTMENT: STEP 3  The data processing department creates the receiving report file from data provided by the receiving report documents.  Then a batch program updates the inventory subsidiary file from the receiving report file. The program removes the “On Order” flag from the updated inventory records and calculates batch totals of inventory records and calculates batch totals of inventory receipts, which will later be used in the general ledger update procedure.

 Finally, the associated records in the open PO files are transferred to the closed PO file. ACCOUNTS PAYABLE  When the AP clerk receives the supplier’s invoice, he or she reconciles it with the supporting documents that were previously placed in the AP pending file. The clerk then prepares a voucher file, and sends a copy of the voucher to data processing.

CASH DISBURSEMENTS PROCEDURE DATA PROCESSING DEPARTMENT:  Each day, the system scans the DUE DATE field of the voucher register for items due.  Checks are printed for these items, and each check is recorded in the check register (cash disbursement journal).  The check number is recorded in the voucher register to close the voucher and transfer the items to the closed AP file.  The checks, along with a transaction listing, are sent to the cash disbursement department.  Finally, batch totals of closed AP and cash disbursements are prepared for the general ledger update procedure.  At the end of the day, batch totals of open (unpaid) and closed (paid) AP, inventory increases, and cash disbursements are posted to the AP control, inventory control, and cash accounts in the general ledger. The totals of closed AP and cash disbursements should balance.  The cash disbursements clerk reconciles the checks with the transaction listing and submits the negotiable portion of the checks to management for signing.  The checks are then mailed to the suppliers. One copy of each check is sent to AP, and the other copy is filed in cash disbursements along with the transaction listing. ACCOUNTS PAYABLE DEPARTMENT:  Upon receipt of the check copies, the AP clerk matches them with open vouchers and transfers these now closed items to the closed voucher file.

REENGINEERING THE PURCHASES/CASH DISBURSEMENTS SYSTEM DATA PROCESSING The following tasks are performed automatically: 1) 2) 3) 4) 5) 6)

The inventory file is searched for items that have fallen to their reorder points. A record is entered in the purchase requisition file for each item to be replenished. Requisitions are consolidated according to vendor number. Vendor mailing information is retrieved from the valid vendor file. Purchase orders are prepared and added to the open PO file. A transaction listing of POs is sent to the purchasing department for review.

RECEIVING DEPARTMENT  When the goods arrive, the receiving clerk assesses the open PO file in real time by entering the PO number taken from the packing slip. The receiving screen then prompts the clerk to enter the quantities received for each item on the PO. DATA PROCESSING The following tasks are performed automatically by the system: 1) Quantities of items received are matched against the open PO record, and a Y value is placed in a logical field to indicate the receipt of inventories. 2) A record is added to the receiving report file. 3) The inventory subsidiary records are updated to reflect the receipt of the inventory items. 4) The general ledger inventory control account is updated. 5) The record is removed from the open PO file and added to the open AP file, and a due date for payment is established. Each day, the DUE DATE fields of the AP records are scanned for items due to be paid. The following procedures are performed for the selected items. 1) Checks are automatically printed, signed, and distributed to the mail room for mailing to vendors. EDI vendors receive payment by electronic funds transfer (EFT). 2) The payments are recorded in the check register file. 3) Items paid are transferred from the open AP file to the closed AP file. 4) The general ledger AP and cash accounts are updated. 5) Reports detailing these transactions are transmitted via terminal to the AP and cash disbursements department for management review and filing.

CONTROL IMPLICATIONS THE AUTOMATED SYSTEM IMPROVED INVENTORY CONTROL  The greatest advantage of the automated system over its manual counterpart is improved ability to manage inventory needs. Inventory requirements are detected as they arise and are processed automatically. BETTER CASH MANAGEMENT  The automated system promotes effective cash management by scanning the voucher file daily for items due, thus avoiding early payments and missed due dates. In addition, by writing checks automatically, the firm reduces labor costs, saves processing time, and promotes accuracy. TIME LAG  A lag exists between the arrival of goods in the receiving department and recording inventory receipts in the inventory file. Depending on the type of sales order system in place, this lag may negatively affect the sales process. When sales clerks do not know the current status of inventory, sales may be lost. PURCHASING BOTTLENECK  The purchasing department is directly involved in all purchase decision. For many firms this creates additional work, which extends the time lag in the ordering process. A vast number of routine purchases could be automated, thus freeing purchasing agents from routing work such as preparing POs and mailing them to the vendors. Attention can then be focused on problem areas (such as special items or those in short supply), and the purchasing staff can be reduced. EXCESSIVE PAPER DOCUMENTS  The automated system is laden with paper documents. All operations departments create documents, which are sent to data processing, and which data processing must then convert to magnetic media. THE REENGINEERED SYSTEM The improvements in this system are that: 1) It uses real-time procedures and direct access files to shorten the lag time in record keeping. 2) It eliminates routine clerical procedure by distributing terminals to user areas 3) It archives a significant reduction in paper documents by using digital communications between departments and by digitally storing records.

SEGREGATION OF DUTIES  This system removes the physical separation between authorization and transaction processing. Here, computer programs authorize and process POs as well as authorize and issue checks to vendors. To compensate for this exposure, the system provides management with detailed transaction listing and summary reports. These documents describe the automated actions taken by the system and allow management to spot errors and any unusual events that warrant investigation. ACCOUNTING RECORDS AND ACCESS CONTROLS  Advanced system maintains accounting records on digital storage media, with little or no hard copy backup. Sarbanes-Oxley legislation requires organization management to implement adequate control security measures to protect accounting records from unauthorized access and destruction....