ACCT10003 Lecture Notes - Lecture 6: Purchase Order, Stockout
17 May 2018
School
Department
Course
Professor
Purchases and Payments Business Process
A purchase
•Purchase of inventory for resale (merchandising business)
•Purchase of raw materials for production (manufacturing business)
•Purchase of non-current assets
•Purchase of employee time (wages)
•Purchase of services/products of the use of the business (expenses)
Business Goals - Purchases
•Determine requirements
-Identify markets
-Identify sales opportunities
•Determine Order quantity
-Ordering more/less frequently
-Minimises the total cost of Ordering costs, Holding costs, Stockout costs
-Just-in-time (JIT)
-Ad hoc (one-off, irregular - NCA)
-Purchase requisition
•Order goods and services
-Select vendor
-Quality of goods
-Reliability of delivery
-Price and Payment terms
•Prepare Purchase Order
-Document or electronic order form sent by purchaser to vendor
-Contract between purchaser and vendor once vendor accepts
-Blanket purchase orders/Annual agreements
•Receive goods and services
-Should goods be accepted?
-Accepting goods creates an obligation to pay
-Creates storage and handling costs
-Ensure correct amount of the right goods in acceptable order
-Reject non-conforming goods
•Complete receiving report
-Record of item and quantity received
-Evidence of who received and who checked receipt
-Receipt can be annotated on a copy of the purchase order
-Compare receiving report and purchase order
-Quantity receipted increase inventory on hand
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Document Summary
A purchase: purchase of inventory for resale (merchandising business, purchase of raw materials for production (manufacturing business, purchase of non-current assets, purchase of employee time (wages, purchase of services/products of the use of the business (expenses) Identify sales opportunities: determine order quantity. Minimises the total cost of ordering costs, holding costs, stockout costs. Purchase requisition: order goods and services. Price and payment terms: prepare purchase order. Document or electronic order form sent by purchaser to vendor. Contract between purchaser and vendor once vendor accepts. Blanket purchase orders/annual agreements: receive goods and services. Accepting goods creates an obligation to pay. Ensure correct amount of the right goods in acceptable order. Reject non-conforming goods: complete receiving report. Evidence of who received and who checked receipt. Receipt can be annotated on a copy of the purchase order. Underlying business events for a purchase: purchase events. Storing goods received for inventory: payment events.
