Unit 3 - Module 4 Flashcards
purchase requisition
Document that authorizes a purchase transaction.
purchase order
Document based on a purchase requisition that specifies items ordered from a vendor or supplier.
open/closed purchase order file
The last copy that is filed while preparing a purchase order.
blind copy
Purchase order copy that contains no price or quantity information.
receiving report
Report that lists quantity and condition of the inventories received.
AP pending file
File containing supporting documents needed to set up an account payable.
receiving report file
File in which a copy of the receiving report (stating the quantity and condition of the inventories) is placed.
standard cost system
Organizations that carry their inventories at a predetermined standard value regardless of the price actually paid to the vendor.
actual cost inventory ledger
A ledger that records inventory values based on actual costs rather than standard costs.
supplier’s invoice
Bill sent from the seller to the buyer showing unit costs, taxes, freight, and other charges.
AP packet
Reconciled AP supporting documents (PO, receiving report, and invoice).
open AP file
File organized by payment due date and scanned daily to ensure that debts are paid on the last possible date without missing due dates and losing discounts.
AP subsidiary ledger
Records controlling the exposure in the cash disbursements subsystems.
vouchers payable system
System under which the AP department uses cash disbursement vouchers and maintains a voucher register.
cash disbursement vouchers
Provide improved control over cash disbursements and allow firms to consolidate several payments to the same supplier on a single voucher, thus reducing the number of checks written.
voucher register
Register that reflects a firm’s accounts payable liability.
vouchers payable file
Equivalent to the open AP file.
check register
Record of all cash disbursements.
cash disbursements journal
Contains the voucher number authorizing each check and provides an audit trail for verifying the authenticity of each check written.
closed AP file
Record of all accounts payable that have been discharged by making payment to the creditors.
Basic Technology Purchase System
purchase requisition file
Comprises purchase requisitions. It is created during the sales activity when the inventories drop to their predetermined reorder point.
open purchase requisition file
File that contains a copy of purchase requisitions
open purchase order file
File that contains the last copy of the multipart purchase order along with the purchase requisition.
Basic Technology Cash Disbursements System
Integrated Purchases System
File Structure for AP Supporting Documents
Integrated Cash Disbursements System
What are physical and IT controls for an unauthorized inventory purchases risk?
Physical control - Transaction authorization-formal purchase requisition
IT Control - Automated purchase approval
What are physical and IT controls for receiving incorrect items risk?
Physical control
-Independent verification (Receiving department reconciles receipt with the PO)
-Supervision in Receiving Department
IT Control
-scanner technology
What are physical and IT controls for an inaccurate record keeping risk?
Physical control
- Transaction authorization (AP department authorizes cash disbursements to make payment
- Accounting records (audit trail documents, journals, accounts, and files)
- Independent verification (inventory control, accounts payable, cash disbursements, and GL)
IT Control
- Input data edits
- Error messages
- Automated posting to accounts
- File backup
What are physical and IT controls for a misappropriation of cash and inventory risk?
Physical control
- Supervision (receiving department)
- Independent verification (three-way match)
- Segregation of duties (cash, disbursements, GL, AP function, warehouse, inventory records)
IT Control
- Automated three-way match
- Multilevel Security to provide segregation of duties
What are physical and IT controls for an unauthorized access to data risk?
Physical control
- Access control (source documents, journals, ledgers)
- Segregation of duties (sub-ledgers, GL, asset custody)
IT Control
- Password control
- Multilevel security to prevent unauthorized access to data
vendor’s invoice
Commercial document issued by a vendor to a buyer, indicating the products or services, quantities, and agreed prices for products or services that the vendor has already provided to the buyer. An invoice indicates that payment is due from the buyer to the vendor, according to the payment terms.
A copy of the purchase order (PO) is sent to the
vendor. accounts receivable function. shipping department. sales function.
vendor.
The correct answer is “vendor.” A copy of the purchase order (PO) is sent to the vendor. The purchase order is the formal document that tells the vendor what material is needed, at what price, in what quantity and on what date.
The departments involved in the purchasing process are purchasing, receiving, inventory control and
sales. human resources. accounts payable. accounts receivable.
accounts payable.
The correct answer is “accounts payable.” The departments involved in the purchasing process are purchasing, receiving, inventory control and accounts payable. Accounts payable completes the purchasing process by authorizing and executing the cash disbursement based on a signal from receiving or inventory control.
When a cash disbursement in payment of an accounts payable is recorded
the liability account is decreased. the liability account is increased. the cash account is unchanged. the income statement is changed.
the liability account is decreased.
The correct answer is “the liability account is decreased.” When a cash disbursement in payment of an accounts payable is recorded the liability account is decreased. On the Balance Sheet, accounts payable is a current liability. When a cash disbursement is recorded, the liability will be reduced.
The greatest risk of misappropriation of funds occurs in
the mailroom. accounts payable. the receiving department. the warehouse.
accounts payable.
The correct answer is “accounts payable.” The greatest risk of misappropriation of funds occurs in accounts payable. This may take the form of payments for goods not ordered or received and to vendors that do not exist. The risk can be reduced through supervision, segregation of duties, independent verification, or automated processes.
In a firm with proper segregation of duties, adequate supervision as a compensating control is still necessary in
general ledger. accounts payable. purchasing. receiving.
receiving.
The correct answer is “receiving.” In a firm with proper segregation of duties, adequate supervision is most critical in receiving. Every day materials arrive on the receiving dock. Until those receipts are recorded in the system, they are invisible to anyone but the receivers and their supervisors. Supervision is a compensating control appropriate before more automated controls take effect. Scanning technology and automated three-way match are technological controls that reduce risk.
