Acquisition / payment process McGraw-Hill/Irwin Accounting Information Systems © 2008 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 9 Acquisition / payment process ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Outline Objectives Acquisition / payment steps Documents Internal controls Information technology ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Objectives When you finish studying this chapter, you should be able to: Explain the role and purpose of the acquisition / payment process List and discuss, in order, the steps in the process Identify and describe documents commonly used in the process Suggest and evaluate internal controls associated with it Explain the role of information technology in the process Create and interpret flowcharts and data flow diagrams ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Acquisition / payment steps Request goods / services based on monitored need Authorize a purchase Purchase goods / services Receive goods / services Disburse cash Process purchase returns as necessary ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Acquisition / payment steps Inventory database Inventory information 1.0 Requisition inventory. 2.0 Prepare purchase order. Requisition data Vendor database Vendor information vendor Purchase order 3.0 Receive inventory. Order information Receiving information 4.0 Disburse cash. Authorization information A / P database Payment information Purchase information ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Documents Purchase requisition Purchase order Requests that the purchasing department order goods / services Originates in an operating department Terminates in the purchasing department Purchase order Specifies items ordered, shipping terms and other information about the purchase Originates in the purchasing department Terminates with vendor ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Documents Receiving report Vendor invoice Check Ensures that ordered goods have been received in good condition Originates in receiving department Terminates in various departments Vendor invoice Requests payment from buying organization Originates with vendor Terminates in accounting department of buyer Check Pays the vendor Originates in accounting Terminates with vendor ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Internal controls Inventory monitoring system Justification for unusual goods Conflict of interest policy Criteria for supplier reliability and quality of goods Strategic alliances ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Internal controls Document matching Insurance and bonding Receiving reports with purchase orders Receiving reports and purchase orders with invoices Insurance and bonding Internal audit department ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Internal controls Separation of duties: custody, recordkeeping, authorization Employee monitoring systems “Paid” stamps Information technology, such as radio frequency identification (RFID) ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Information technology Online vendor payments Bar codes Vendor lists Inventory status checks Transaction recording in the AIS ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES