Chapter 7: Purchase system Flashcards

1
Q

Name 2 risks related to the ordering stage in the purchase system

A
  1. goods for personal use
  2. goods not on the most advantageous terms
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2
Q

Describe the process of ordering in the purchase system

A
  1. 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
  2. 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
  3. authorization of orders only for business use -> raised orders -> purchase orders will be kept in a locked office
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3
Q

Name 5 risks related to the goods inwards and recording of invoices in the purchase system

A
  1. goods may be misappropriated for private use
  2. invoices may be mislaid leading to non-payment
  3. invoices are paid at the wrong time/ amount
  4. payment/ credits not recorded
  5. record in wrong period
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4
Q

Describe the process of goods inwards and recording of invoices in the purchase system

A
  1. 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
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5
Q

Name 2 risks related to the cash payments in the purchase system

A
  1. payments made inappropriately
  2. blank cheques/ cash are stolen
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6
Q

Describe the process of cash payments in the purchase system

A
  1. re-check the credit terms to ensure all payment are made in advantageous term
  2. clerk/ cashier takes the cheques/ cash; prepare expenditure orders -> financial controller authorize expenditure
  3. accounts department record cash payment and adjust payable ledger
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