Expenditure cycle : Purchases and cash disbursements procedures
6 important questions on Expenditure cycle : Purchases and cash disbursements procedures
What are the four main processes that constitute the expenditure cycle?
2. Cash disbursements procedure
3. Fixed asset systems
4. Payroll
What are the expenditure cycle controls according tot SAS 78 in the purchasing processing procedure?
Segregation of duties: Inventory separate from purchasing and inventor custody. AP subsidiary ledger separate from the general ledger.
Supervision: Receiving area.
Accounting records: AP subsidiary ledger, general ledger, purchase requisition file, purchase order file, receiving report file.
Access: security of physical assets, limit access to the accounting records above. Independent verification: AP reconciles source documents before liability is recorded. General ledger reconciles overall accuracy of process.
What is the cash disbursement system, and the procedures in the expenditure cycle?
Steps of the process:
Identify liabilities due
Prepare cash disbursement
Update AP records
Post general ledger
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What are the expenditure cycle controls according to SAS 78 for the cash disbursement system?
Segregation of duties: Separate AP subsidiary ledger, cash disbursements, and general ledger functions
Supervision: X
Accounting records: Voucher payable file, AP subsidiary ledger, Cash disbursements journal, general ledger cash accounts.
Access:/proper security over cash. Limit access to the accounting records above. Independent verification: Final review by cash disbursements. Overall reconciliation by general ledger. Periodic bank reconciliation by control.
What are the steps of the manual system?
Inventory control
Purchasing department
Receiving: the received report are put into the open PO file.
AP department: transfers the file to the open vouchers payable file. General ledger department
What are the control implications for the automated system?
better cash management
time lag
purchasing bottleneck
excessive paper documents
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