Chapter 7: Purchase system Flashcards
1
Q
Name 2 risks related to the ordering stage in the purchase system
A
- goods for personal use
- goods not on the most advantageous terms
2
Q
Describe the process of ordering in the purchase system
A
- BOD makes plans on requisitions for the year (set out pre-set level of inventory in each department) -> each department, based on its operations demand materials and goods
- purchasing department receives orders from each department (numbered forms) -> find out reliable suppliers (central policy) -> authorization of suppliers made by mgt -> negotiations about methods of payment, the most advantageous prices
- authorization of orders only for business use -> raised orders -> purchase orders will be kept in a locked office
3
Q
Name 5 risks related to the goods inwards and recording of invoices in the purchase system
A
- goods may be misappropriated for private use
- invoices may be mislaid leading to non-payment
- invoices are paid at the wrong time/ amount
- payment/ credits not recorded
- record in wrong period
4
Q
Describe the process of goods inwards and recording of invoices in the purchase system
A
- receives goods & invoices electronically from suppliers -> check for total quantity and quality according to orders on the day of arrival -> warehouse staff issues good received record (GRR) -> a copy of GRR is forwarded to the accounts department
2.1. after receiving GRR and invoices, accounts department record good inwards immediately (inspect data on invoices) -> enter to payables ledger
2.2. good in poor quality -> production department sent copy of purchase return notes to accounts department -> review credit notes, regular comparison of supplier statement
5
Q
Name 2 risks related to the cash payments in the purchase system
A
- payments made inappropriately
- blank cheques/ cash are stolen
6
Q
Describe the process of cash payments in the purchase system
A
- re-check the credit terms to ensure all payment are made in advantageous term
- clerk/ cashier takes the cheques/ cash; prepare expenditure orders -> financial controller authorize expenditure
- accounts department record cash payment and adjust payable ledger