Chapter 11: Purchases and Payroll

Question 1

What functions does the processing of purchase transactions involve?

Answer 1

• Requisitioning goods and services.
• Preparing purchase orders.
• Receiving the goods.
• Storing goods received.
• Checking and approving the supplier’s invoice.
• Recording the liability.

Question 2

What do purchase order typically contain?

Answer 2

• Description of goods/services ordered
• Quantities
• Price
• Delivery instructions
• Supplier information

Question 3

Receiving the Goods

Answer 3

should be recorded the goods received, the quantity received, and inspect the goods for damage.

Question 4

Segregation

Answer 4

of receiving from both the requisition and purchasing functions aids in preventing direct ordering from suppliers plus reduces the chance of unauthorized access to goods improperly ordered.

Question 5

Recording the Liability

Answer 5

suppliers normally send the invoice directly to the accounting department. Prior to recording the supplier’s invoice, the invoice should be checked for accuracy and approved.

Question 6

What are the relevant functions for payroll?

Answer 6

• Hiring employees.
• Authorizing payroll changes.
• Preparing attendance and timekeeping data.
• Preparing the payroll.
• Recording the payroll.
  Paying the payroll and protecting unclaimed wages.

Question 7

Personnel Authorization Form

Answer 7

all approved positions are documented on a personal authorization form showing the position classification and starting wage level. A copy of this form is forwarded to payroll.

Question 8

How to reduce the risk of payments to fictitious employees?

Answer 8

• Segregation of the personnel and payroll functions aids in reducing the risk.
• Any change to job classifications or a wage increase must be authorized and submitted to the personnel department in writing before the change can be entered into the master file.