Chapter 8

Procurement and Human

Resource Business Processes
 Presentation Outline

I. Expenditure Cycle Concepts

II. The Expenditure Cycle
III. Payroll Concepts
IV. The Payroll Application System
I. Expenditure Cycle Concepts

A. Purchase Requisitions
B. Purchase Orders
C. Receiving Reports
D. Voucher Systems
E. Invoice Verification
 A. Purchase Requisitions
We better
 A purchase requisition
order
these! is an internal document
created to request the
procurement of
something.
 They originate in stores
or other departments
within an organization.
 B. Purchase Orders
 Purchasing selects a We will get
vendor, then prepares a these from
purchase order for the Acme, Co.
requisitioned goods.

 The purchase order

identifies the vendor,
confirms the goods
ordered, quantity, price,
delivery date, and
payment terms.
C. Receiving Reports
 Purchase orders authorize
the receiving department to
accept delivery from a
vendor.
 Blind counts help ensure
that receiving actually
count the goods received.
 A receiving report
summarizes the goods
received and accompanies
them to stores.
 D. Voucher Systems
 The real control over disbursements is a final review of
documents evidencing the entire transaction prior to
authorization of payment.
 In a strict voucher payable system, individual accounts for
creditors need not be kept. Several vouchers may relate to
the same creditor, as opposed to a single account in an
accounts payable system.
 A voucher shows, among other things, the name and address
of the vendor, a description of the invoice, total or net
amount due, and accounts to be charged (distribution).
 Built-up voucher systems accumulate several invoices from
the same vendor and pay these invoices with a single check.
E. Invoice Verification
 Invoices must be checked
against receiving reports
and original purchase
orders prior to payment.

 Payment should only be

approved when the above
documents match, or the
invoice has been
satisfactorily reconciled to
the other documents.
 II. The Expenditure Cycle
A. Requisitioning in Stores
B. Order Processing in Purchasing
C. Receiving
D. Delivery Acknowledgement in Stores
E. Invoice Verification in Purchasing
F. Accounts Payable Prepares the Voucher
Package
G. Cash Disbursements
H. General Ledger
I. Internal Audit
 A. Requisitioning in Stores

 Requests for purchases

originate outside the
Prepare
purchasing department.
Requisition  Purchase requisitions
arise in stores or other
Requisition departments.
Processing Purchase
Database
 Requisitions should be
approved in the
originating department.
 Purchasing has access to
the requisition thru the
purchase database.
 B. Order Processing in Purchasing
 Purchase requisitions may
Prepare be overridden due to a
Order
Purchase
lack of funds, improper
Requisition authorization by the
Select requesting department,
Vendor
etc.
 Purchasing selects a
vendor using an approved
Retrieve Order vendor list or a bidding
Purchase Purchase Processing
Requisition Database process.
 Accounts payable, the
Purchase requesting department,
Order and receiving all have
access to the purchase
order through the
purchase database.
To Vendor
From Vendor
C. Receiving
 Receiving accesses the
Match to
Delivery
Purchase
Purchase
Order
purchase order and matches
Order it with the vendor delivery.
 Receiving only accepts
Retrieve
Purchase deliveries for which there is
Order
an existing purchase order.
 Blind counts are often used to
force counters to actually
Purchase
Database count the items received.
 A receiving supervisor later
verifies the quantity against
Blind Order
Count
Enter
Receipt Processing the purchase order.
 Stores has access to this
report thru the purchase
Delivery
To Stores database.
 D. Delivery Acknowledgement in Stores
From
Receiving

Delivery
Receiving  The stores department
Match to Report
Delivery acknowledges receipt of
the delivery on the
Retrieve receiving report in the
Receiving purchase database.
Report
 Purchasing and
accounts payable have
Goods access to the
Receipt
Processing
Purchase
Database
acknowledged report
thru the purchase
database.
 E. Invoice Verification in Purchasing
From Vendor
 Purchasing uses the
purchase database to
compare the purchase
Vendor order, acknowledged
Invoice
receiving report, and vendor
invoice for any
discrepancies.
Purchase Invoice
Database Verification  Purchasing authorizes the
invoice for payment once
they are satisfied that the
Vendor
Invoice invoice is correct per the
order and what was
received.
To Accounts
Payable
 F. Accounts Payable Prepares the Voucher Package
From Purchasing
 The purchase
requisition, purchase
Vendor
Invoice order, acknowledged
receiving report, and
Prepare approved vendor
Voucher
Purchase
Requisition
invoice provide the
Purchase
support for the
Order Accounts preparation of a
Payable
Receiving
Report
Voucher
Processing or voucher.
Voucher
Register  The voucher serves to
summarize the
Retrieve Voucher Voucher Journal
Documents Check Voucher purchase for entry on
the records as a
liability.
Purchase To General
Database To Cash Ledger
Disbursements
 Voucher
G. Cash Disbursements
Sign Cancel
From Accounts
Payable
Voucher
Check
Checks Voucher
after  Cash
Signing
Check
disbursements
Voucher Voucher received the
Check
voucher
package and
Post
check for
Check
Register signing.
 Cash
disbursements
Voucher Control
maintains a
Check Total check register
and forwards a
journal entry to
Forward to To General general ledger.
Payee Ledger
 H. General Ledger
Control Journal
Total Voucher  General ledger
From Cash From Accounts
Disbursements Payable receives the journal
entry from accounts
Compare
Post payable (Debit –
Accounts payable
General
Ledger
and Credit – Cash)
General
Processing Ledger and compares it to
the control total for
Control
Total
cash disbursements.
Journal
Voucher
 The journal entry is
then posted into the
general ledger.
 I. Internal Audit
Bank
Statement
From Cancelled
Bank Checks An independent
reconciliation
of the bank
Bank
Reconciliation
Check account is
Register
performed by
Bank
internal audit.
Reconciliation

Bank
Statement

Cancelled
Checks
III. Payroll Concepts
A. Personnel
B. Timekeeping
C. Payroll
D. Other Payroll Features
E. Tax Forms
A. Personnel
 Personnel is responsible for
placing people on the
payroll, specifying rates of
pay, authorizing
deductions, and any
changes payroll items.

 The personnel function is

distinct from timekeeping
and payroll preparation.
 B. Timekeeping
 Timekeeping is
responsible for the
preparation and
control of time reports
and job time tickets.

 Timekeeping
reconciles employee
hours to job time
summary reports
received from
production.
C. Payroll

 The payroll department is

responsible for the actual
computation and
preparation of payroll.

 It should be noted that

payroll is independent of
timekeeping and
personnel.
 D. Other Payroll Features
 Separate imprest payroll
account to facilitate
reconciliations.

 Independent reconciliation
of payroll bank account.

 Independent paymaster
distributes checks (i.e.
independent of personnel,
timekeeping, and payroll).
 E. Tax Forms

a) Form 941 – Quarterly filing summarizing federal

withholding, social security, and medicare taxes.
b) Form W-2 – On or before Jan 31 an employee must
provide employees with this wage and tax statement.
c) Form W-3 – Summary form that accompanies copies
of Forms W-2 sent to the federal government on or
before Feb. 28.
d) Form 1099 Misc – Documents contract services over
a certain amount in a given year.
e) Earnings statement – Statement summarizing payroll
computations for an employees pay check.
IV. The Payroll Application
System
A. The Role of Personnel
B. Payroll Processing
C. Internal Audit and the Bank
Reconciliation
 A. The Role of Personnel
The authorization for placing people on the payroll should be
separated from the record keeping that payroll performs.
Personnel Payroll

Authorization Authorization
and and
Notification Notification
 B. Payroll Processing
Cash Cost Accounts General
Disbursement Timekeeping Distribution Payroll Payable Ledger
From
Production

Job Time Job Time

Summary Summary

Payroll
Distribution
Journal
Reconcile Journal Voucher
Voucher

Check is
signed and Employee Employee
deposited in Time Cards Time Cards
Compare
imprest
payroll bank Payroll Payroll
account Register Register

Check
Check
1 2
1 Voucher 2
Voucher Voucher
 C. Internal Audit and the Bank Reconciliation
Internal audit received information directly from the bank and
performs an independent reconciliation of the payroll bank
account.
Bank Internal Audit

Deposit Deposit
Slips and Slips and
Checks Checks

Bank Bank
Statement Statement
 Summary
Forms used in the expenditure cycle
Steps of the expenditure cycle
Payroll duties
Possible Payroll Features
Payroll Forms
Steps in the payroll cycle