EXPENDITURES CYCLE

PURCHASES AND CASH DISBURSEMENT PROCEDURES

1. The revenue cycle or the conversion cycle initiates the purchase process.
2. When inventories are reduced by sales, the system determines if the affected items in the
inventory subsidiary file have fallen to their reorder point.
3. Upon receipt of the purchase requisition, the purchasing department prepares a five part
purchase order. (Vendors, accounts payable, receiving, data processing, and the purchasing
departments own file.
4. When the goods arrive from vendors, the receiving clerk prepares a receiving report.
(purchasing, accounts payable, and data processing)
5. The data processing department runs a batch job that updates the inventory subsidiary file from
the receiving reports and removes the on order flag from the inventory record.
6. When the accounts payable clerk receives the suppliers invoice, he or she reconciles it with the
supporting documents that were previously placed in the accounts payable pending file.

ADVANTAGES OF AUTOMATED SYSTEM

1. Improved Inventory Control

2. Better Cash Management
3. Time lag
4. Purchasing Bottleneck
5. Reduce Excessive Paper Documents
6. Segregation of Duties
7. Accounting Records and Access controls