Tutorial 5 - Lecture notes 5 PDF

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Tutorial 5 1, What are the goals of an Expenditure cycle? 2, (a) What are the 3 systems in the conceptual Expenditure cycle?  Purchasing processing  Vouchers payable system  Cash disbursement system (b) Describe the DFD for Purchasing Processing DFD (Data Flow Diagram) for Purchasing Processing including 5 processes  Monitor inventory : o This shows that the trigger for this system is identifying inventory records with levels that indicate that replenishment is required. A purchase requisition is prepared and sent to the purchase order function to initiate the purchase process. o This process also identifies an appropriate supplier. 

Prepare purchase order o This process prepares multiple copies of a purchase order (PO) after receiving the purchase requisition from Process 1. o One copy of the PO goes to the Supplier. o 2nd copy goes to Accounts Payable for filing temporarily in the AP pending file. o The Blind copy is sent to the receiving goods process, where it is held until goods arrive. o The last copy is filed in the open/closed purchase order file.

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Receive goods o When the goods are received, they are checked and sent to stores with the receiving report, with copies of the receiving report going to processes 4 and 5, to update inventory and accounts payable. o A copy of the receiving report is filed in the Open/Closed PO file to close the purchase. o A copy of the receiving report is place in the receiving report file.

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Update inventory records o The inventory records are updated and summary information is sent to general ledger for updating control accounts in process 6. Set up accounts payable o The A/P process reconciles the supplier’s invoice when it arrives with the information received from processes 2 and 3 (held in AP Pending File). It updates the accounts payable, and sends summary information to general ledger, process 6.

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3, Describe the processes in the Voucher Payable system 4, Describe the processes in the Cash Disbursement system •

Identify liabilities due

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Prepare cash disbursement

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Update AP records

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Post to general ledger

5, Describe the Physical Controls (basic Technology) for the purchasing Processing system 6, Repeat Q(5) for the Cash Disbursement system. Basic Technology: Physical Controls

Last step: is the process of matching the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement. 7, Repeat Q(5) but for Physcial Controls (Advanced Tech)

8, How does the Fixed Asset System (FAS) differ from the traditional Expenditure Cycle? Show off on the FAS • 1.

The fixed asset system shares some characteristics with the expenditure cycle, but there are two important differences:

The fixed asset system processes non-routine transactions for a wider group of users. •

The expenditure cycle processes routine acquisitions of raw materials for the production function or finished goods for the sales function

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Fixed asset transactions require specific management approval and explicit authorization procedures for all functional areas in the organization

2. Organizations capitalize fixed assets that yield benefits for multiple periods, while they correctly treat inventory acquisitions as an expense of the current period. •

The productive life of a fixed asset extends beyond one year, so its cost is apportioned over its lifetime, and depreciated according to accounting conventions and statutory requirements...