Purchasing or Expenditure Cycle

1. Purchasing or Expenditure Cycle • People • Activities • Documents • Files

2. People/Departments • Inventory Control • Purchasing • Warehouse • Receiving • Accounts Payable • Cashier

4. Activities • Recognize the need for goods • Order goods • Receive goods • Record liability • Pay the vendor

5. Expenditure Cycle Documents

6. Purchase Requisition • an internal document used to request that stock be replenished • Prepared by inventory control • Sent to Purchasing (second copy to file) • Triggered by the value in the inventory file (Quantity on hand is less than or equal to the ROP)

7. Purchase Order • Prepared by Purchasing (specifically Buyers) • Triggered by and Authorized by the receipt of a valid Purchase Requisition. • Copies to Vendor, Receiving, A/P, requisitioning dept., and to the file

8. Receiving Report • Prepared by Receiving • Triggered by receipt of goods on a valid P.O. Authorized to accept goods if receiving has a copy of the PO. • Copies sent to A/P and to warehouse with the goods and to inventory control.

9. Check and Remittance Advice • Prepared by A/P--but should be signed/issued by Treasurer or cashier • payment is authorized by matching of the PO, Vendor Invoice and Receiving Report • Payment is triggered by the vendor invoice due date • Original to the vendor, copy to file with supporting documents

10. Master Files • Vendor master file (approved vendors) • Open PO file • A/P Master file (may be combined with vendor master) • Inventory Master • G/L

11. Transaction Files • Purchase requisitions • Purchase orders • Receiving Reports • A/P transactions (vendor invoice info) • Cash disbursements