Accounting Information Systems - Chapter 10

Flashcards about Purchasing and Payments Processes.

Purchasing or Procurement Processes

Processes focused on acquiring necessary resources for a business to operate.

Payments Processes

Processes focused on paying for the resources acquired by a business.

Classifications of Inventory

Raw Materials, Work in Process, and Finished Goods.

Inventory Control Department

Department responsible for managing inventory levels to ensure optimal amounts are on hand.

Purchase Requisition

A request from the inventory control department to obtain goods from an authorized source.

Purchase Order

An external document used to request a supplier to sell and deliver products at specified quantities and prices; becomes a legal contract upon acceptance.

Packing Slip

Shows quantities and descriptions of items delivered by a supplier.

Receiving Report

Shows descriptions and quantities of goods received from vendors and discrepancies.

Vendor Invoice

A bill from the vendor including the purchase order number, billing date, description and quantities of goods, amount due, and payment terms.

Inventory Management

Process that coordinates the communication of inventory availability and needs across the purchasing, conversion, and sales processes.

Supply Chain Management (SCM)

Process that oversees the life cycle of a product from procuring raw materials through customer sales, involving collaboration between a company and its suppliers.

Physical flows in supply chain management

Involves storing, transforming, and moving inventory.

Information flows in supply chain management

Require information technologies to coordinate activities and control the flow of goods and materials along the supply chain.

Vendor Management Control Activities

Automated supplier portals, documented policies, regular vendor reviews, segregation of duties, and routing purchases through the purchasing department.

Order Placement Control Activities

E-procurement systems, paperless evaluated receipt settlement (ERS), prenumbering requisitions/orders, and approval processes.

Receiving Control Activities

Segregation of duties, physical segregation, restricted access, cameras, and e-procurement systems.

Fixed Assets (Property, Plant, and Equipment - PP&E)

Land, buildings, equipment, furniture, and vehicles.

Capital Expenditures (CAPEX)

Costs of acquiring fixed assets.

Bid Rigging

Fraudulent means of obtaining a contract meant to be subject to a competitive bidding process.

Payments or Cash Disbursements Processes

Involve paying for acquisitions made in the purchasing processes, impacting the cash balance.

Two primary methods of paying for purchases

Making cash payments and using credit.

Fraud Risk in Payments Process

Creating a fictitious vendor and sending fraudulent payments to accounts the employee controls.

Payments Control Activities

Segregation of duties, bank reconciliation, traceable audit trails, invoice accuracy checks, and use of original invoices.

Checking Supplier Invoices for Accuracy

Comparing supplier invoices to purchase orders and checking quantities, prices, calculations, and taxes.

Three-Way Match

Matching the purchase report, the receiving report, and the vendor’s invoice.

Data integration , real-time information, workflow automation, reporting and analytics , and Access controls

Five key ERP system features

Three way match tables keys

Primary and foreign keys, relation database

Vendor Master Table

A list of all approved vendors from the main vendor table.

Vendor performance

Identifying how long it took to receive an order, the quality of goods received, and the condition of goods received.

Untagged assets

Analyzing a list of fixed assets with no tag numbers by location, buyer, and cost.

Purchase Orders Aging Report

The number of days purchase orders have been outstanding, classified in buckets.

Cash Disbursements Journal

An accounting journal of cash disbursements that captures all payments recorded.

Early Payments

Identifying payments made before invoice due dates; Identifying payments to a fictitious vendor

Vendor invoice number

Analyzing payments made to the same vendor with little or no sequence between vendor invoice numbers