The Expenditure Cycle Part l: Purchases and Cash • Post to General Ledger

Disbursement Procedures
- final step of purchases of the expenditure cycle.

Expenditure Cycle
THE CASH DISBURSEMENTS SYSTEM
- to convert the organizations cash into physical materials and
human resources it needs to conduct business. The cash disbursements system processes the payment of
obligations created in the purchases sys. tem. The principal
Purchases processing procedures: objective of this system is to ensure that only valid creditors
receive payment and that amounts paid are timely and
correct.

• Monitor Processing Procedures

- A purchase requisition is a document that authorize a IDENTIFY LIABILITIES DUE

purchase transaction.
The cash disbursements process begins in the AP department,
Inventory Record - repositories of data pertaining to each where each day the AP clerk reviews the open AP file for items
item in brand's product line. due for payment. Typically, this file is organized by payment
due date to ensure that debts are paid on the last possible date
with- out missing due dates and losing discounts.
• Prepare Purchase Order

- A purchase order(PO) is a document based on purchase

PREPARE CASH DISBURSEMENT
requisition that specifies items ordered from a vendor or
suppliers. The cash disbursements clerk receives the AP packet and
reviews the documents for completeness and clerical
accuracy. For each disbursement, the clerk prepares a check
• Recieve Goods and records the check number, dollar amount, and other
pertinent data in the check register, which is also called the
- The receiving report file is the file which a copy of the cash disbursements journal.
receiving report ( states the quantity and conditions of the
inventory) is placed. DR CR

Accounts Payable xxxxxx

• Update Inventory Records Cash xxxxx

Standard Cost System - used in organizations that carry their

inventories at a predetermined standard value.
UPDATE AP RECORD
Actual Cost Inventory Ledger- records inventory values based
Upon receipt of the paid AP packet, the AP clerk removes the
on actual costs rather than standard cost.
liability by debiting the vendor's AP subsidiary ledger account.
The AP packet is then filed in the closed AP file, and an
account summary is prepared and sent to the general ledger
•Set up Accounts Payable (AP) function.

• Vouchers Payable System POST TO GENERAL LEDGER

- A system which the AP department uses cash disbursement The general ledger function receives the journal voucher from
vouchers and maintains a voucher register. cash disbursements and the AP account summary from
accounts payable. The voucher shows the total reductions in
the firm's obligations and cash account as a result of payments - This department receives journal voucher from AP and
to suppliers. account summary from inventory control.

PHYSICAL SYSTEMS Advanced Technology Expenditure Cycle

Physical accounting information systems are a combination of - The purpose of advance technologies in AIS is to integrate
computer technology and human activity. The mix of possible accounting and other business functions through common
technology/human options creates a continuum. At one end information system.
are minimal technology systems that rely heavily on human
involvement and manual procedures. At the other end of the - Integration improves operational performance and reduces
continuum are advanced technology systems, which replace costs by eliminating non value added tasks.
human activity with automated processes.

Part ||: Payroll Processing and Fixed Asset Procedures

BASIC TECHNOLOGY EXPENDITURE CYCLE
Payroll Processing - a special case purchase system which the
The computers used in these systems are independent (non- organization purchases labor rather than raw materials or
networked) PCs. Therefore, information flows between finished goods for resale.
departments are communicated via hard-copy documents. In
addition, in such systems, maintaining physical files of source
documents is critical to the audit trail. Key points of Payroll System Process:

• Personnel Department

Basic Technology Purchase System - prepare and submits personnel action from the prepare
payroll function.
• Inventory Control Department

- The process begins when the inventory control clerk prints

purchase requisition from his PC by accessing the requisition • Production Department
file.
- prepare two time records:

a. Job tickets- captures the time that individual workers send

• Purchasing Department on each production job.

- This department receives the purchase requisition, it adds b. Time cards- captures the time the employee is at work.
records to the digital open purchase file.

Open Purchase file - contains the last copy of multipart

purchase order along with the purchase requisition. • Update WIP ( Work in Process) Account

• Receiving Department • Prepare Payroll

- Receives the goods at the packing slip from the vendor and A clerk in the payroll department perform the following tasks:
reconciles the goods with the blind copy of the PO.
1. Prepare Payroll register showing gross pay, deductions,
overtime pay, and net pay.

•AP Department 2. Enters this information to employee payroll records.

- This department reconciles invoice purchase order amd 3. Prepare employee paycheck
receiving reports, it records transaction in the purchases
journal. 4. Send the paycheck to distribute paycheck function

• General Ledger Department 5. Files the time cards, personnel action form and copy of
payroll register.
• Distribute Paycheck Proximity cards

- Similar to swipe card but don't require the user to slide the
card through a reader.
• Prepare Cash Disbursement
Mobile remote devices

- Allow employee to clock in using handheld devices (tablet or

• Update General Ledger cellphones) or web browsers form laptop computer.

- receives labor distribution summary from cost accounting. Fixed Asset

Advance Technology Payroll System - The property, plant, and equipment used in operation of
business. These are relatively permanent items that often
- For moderate and large organization, payroll processing is
collectively represent the largest financial investment by the
often integrated within the human resource management
organization.
(HRM) system. The HRM captures and process wide range of
personnel related data. Asset Acquisitions

- Usually begins with the department manager (user)

recognizing the need to obtain a new asset or replace an
Human Resources.
existing one. Authorization and approval procedures over the
Human Resources clerk enter data into the employee file in transaction will depende on the asset's value.
real time from terminals. This includes additions of new
Asset Maintenance
employees, deletion of terminated employees, changes in
dependents, withholding, and changes in job title and pay rate. - Involves adjusting the fixed asset subsidiary account balance
as the asset depreciate over time or with usage.

Asset Disposal
Cost Accounting
- When an asset has reached the end of its useful life or when
- The cost accounting department enters job cost data in real
management decides to dispose of it, the asser must be
time to crate the labor usage file.
removed from the subsidiary ledger.

Employee Timekeeping

- Capturing and maintaining accurate time and attendance

date in this dynamic environment, can be both domestically
and internationally.

Biometric time clocks

- verify employees identities by using fingerprint and hand

vein scan technology.

Magnetic swipe ID cards

- Each employee is issued an ID cards that has a magnetic strip

containing employee information.