ACCT 3280 Chapter Notes - Chapter 13: Shipping List, Accounts Payable, Purchase Order

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31 Mar 2018

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Includes description , quantity, and related information for goods/services. Indicates reduction in amount owed to vendor because of returned goods/ allowancs. Purchase acquisition: used to request goods and services by an authorized employee. Purchase order: document used to order goods and services from vendors. *receipt by the company of goods or services from vendor is critical point in the cycle-its when most companies first recognize the acquisition and related liability on their records. Receiving report is a paper/ electronic document prepared at time goods were shipped. Vendors invoice: document received from the vendor that shows the amount owed for acquisition. Important because it indicates amount recorded in the acquisition transaction file. It tells description & quantity of goods received. It includes cash discount terms , date of billing and amount. Voucher: include purchase order, copy of packaging slip, receiving report, vendors invoice. Acquisitions journal or listing often known as purchases journal or utililities.

Related Questions

Solve the following QS and Exercises from your textbook in chapter 8.

QS 8-1

Internal control objectives

An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. Evaluate each of the following statements and indicate which are true and which are false regarding the objectives of an internal control system.

____	1.	Separation of recordkeeping for assets from the custody over assets is intended to reduce theft and fraud.
____	2.	The primary objective of internal control procedures is to safeguard the business against theft from government agencies.
____	3.	The main objective of internal control procedures is best accomplished by designing an operational system with managerial policies that protect the assets from waste, fraud, and theft.
____	4.	Separating the responsibility for a transaction between two or more individuals or departments will not help prevent someone from creating a fictitious invoice and paying the money to herself or himself.

QS 8-2

Cash and equivalents

Choose from the following list of terms/phrases to best complete the following statements.

a.	Cash
b.	Cash equivalents
c.	Outstanding check
d.	Liquidity
e.	Bank reconciliation
f.	Current assets

____	1.	The category includes currency and coins along with amounts on deposit in bank accounts, checking accounts, and savings accounts.
____	2.	The term __________ refers to a companyâs ability to pay for its near-term obligations
____	3.	The __________ category includes short-term highly liquid investment assets that are readily convertible to a known cash amount and sufficiently close to their due dates so that their market value is not sensitive to interest rate changes.

QS 8-3

Internal control for cash

A good system of internal control for cash provides adequate procedures for protecting both cash receipts and cash disbursements. Identify each of the following statements as either true or false regarding this protection.

____	a.	A basic guideline for safeguarding cash is that all cash receipts be deposited weekly or monthly.
____	b.	A voucher system of control is a control system exclusively for cash receipts.
____	c.	A basic guideline for safeguarding cash is to separate the duties of those who have custody of cash from those who keep cash records.
____	d.	A petty cash system is not a control procedure for safeguarding cash.

QS 8-4

Petty cash accounting

The petty cash fund of the Brooks Agency is established at $150. At the end of the current period, the fund contained $28 and had the following receipts: film rentals, $24; refreshments for meetings, $46 (both expenditures to be classified as Entertainment Expense); postage, $30; and printing, $22. Prepare journal entries to record (a) establishment of the fund and (b) reimbursement of the fund at the end of the current period.

Identify the two events from the following that cause a Petty Cash account to be credited in a journal entry.

____	a.	Fund amount is being reduced
____	b.	Fund amount is being increased
____	c.	Fund is being eliminated
____	d.	Fund is being established

Exercise 8-13^A

Documents in a voucher system

Match each document in a voucher system in column one with its description in column two.

Document

1.	Purchase requisition
2.	Purchase order
3.	Invoice
4.	Receiving report
5.	Invoice approval
6.	Voucher

Description

____	A.	An itemized statement of goods prepared by the vendor listing the customerâs name, items sold, sales prices, and terms of sale.
____	B.	An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.
____	B.	An internal file used to store documents and information to control cash disbursements and to ensure that a transaction is properly authorized and recorded.
____	C.	A document used to place an order with a vendor that authorizes the vendor to ship ordered merchandise at the stated price and terms.
____	D.	A checklist of steps necessary for the approval of an invoice for recording and payment; also known as a check authorization.
____	E.	A document used by department managers to inform the purchasing department to place an order with a vendor.
____	F.	A document used to notify the appropriate persons that ordered goods have arrived, including a description of the quantities and condition of goods.

Exercise 8-14^B

Record invoices at gross or net amounts

Piere Imports uses the perpetual system in accounting for merchandise inventory and had the following transactions during the month of October. Prepare entries to record these transactions assuming that Piere Imports records invoices (a) at gross amounts and (b) at net amounts.

Oct.	2	Purchased merchandise at a $3,000 price, invoice dated October 2, terms 2/10, n/30.
	10	Received a $500 credit memorandum (at full invoice price) for the return of merchandise that it purchased on October 2.
	17	Purchased merchandise at a $5,400 price, invoice dated October 17, terms 2/10, n/30.
	27	Paid for the merchandise purchased on October 17, less the discount.
		31Paid for the merchandise purchased on October 2. Payment was delayed because the invoice was mistakenly filed for payment today. This error caused the discount to be lost. Please provide all the answer thank you

tanmouse0

(ACCOUNTING INFORMATION SYSTEM)

Business scenario:

The model enterprise in this study is Euphoria Event Management Company (EEMC). As one of the major players in the event management industry, it provides a one-stop wedding service, organizes birthday parties, manages various kinds of celebrations and thus offers catering services based on the requirements of the customers. Due to this, the company handles multiple food inventory sales and purchases transactions and often slipped off the appropriate tracking and consumption of costs. Moreover, since it is classified as SME (small to medium-sized enterprise), it often fails to appreciate the importance of internal control in its daily operations.

The revenue cycle system at EEMC

The steps and procedures implemented within the revenue cycle of the company can generally be explained as follows:

1) Sales executive receives customer order by phone, fax or from a meeting.

2) She forwards the customer order to the kitchen department with details on quantities of food inventory needed and the date of delivery to customer.

3) The kitchen supervisor issues a Sales Order or sometimes a Packing Slip for the food order. Using this document, EEMC delivers the goods to customer.

4) Upon receiving the food, customer stamps and signs the Sales Order/Packing Slip.

5) One month after the delivery date, the accounts clerk at EEMC bills the food with Sales Invoice (stamp-duty receipt with authorized signature). The customer takes the original invoice while the company gets the copy of invoice and stamped receipt generated by the customer.

6) Two month after the delivery date, the accounts clerk makes a courtesy call to customer on the payment due.

7) Customer makes payment either using a cheque/clearing deposit slip or via a bank transfer.

8) As evidence of payment, the accounts clerk requests the original payment document (receipts or cheque stub) from

the customer or just check the transaction from the bank statements.

9) The accounts clerk records the sales transaction and the amount of sales in the general ledger. She also keeps the revenue cycle related documents as proof of the transaction.

The expenditure cycle system at EEMC

The steps and procedures implemented within the revenue cycle of the company can generally be explained as follows:

1) EEMC sets the budget for inventory purchase.

2) The Bill of Materials/Purchase Requisition document is created.

3) The procurement officer invites interested suppliers to quote their inventory price.

4) The procurement officer compares the quotation (price) of inventory among the various suppliers and appoints the

supplier who offers lowest price that commensurate with the desired quality of food. Appointment is usually conveyed by phone or fax.

5) When the food inventory arrives at the warehouse, the accounts clerk checks the quantity and the quality of inventory to confirm the order with the Bill of Materials.

6) Next, the supplierâs invoice (no Packing Slip from supplier, so the inventory is delivered with the invoice) is signed and the copy is taken and kept at the accounts department.

7) Between one to two weeks after the receipt of inventory, the accounts clerk confirms and pays for the purchases via a bank transfer. EEMC keeps the original receipt.

8) The accounts clerk records the purchase transaction and the amounts of obligation paid in the general ledger. She also keeps the expenditure cycle related documents as proof of the transaction.

Instructions:

1. Evaluate and comment on the internal control system related to the revenue cycle and expenditure cycle of the company. For each of the cycle, your answers must relate to the organizational control, documentation control and management practice control.

2. Using your own knowledge and creativity, suggest at least 3 ways to strengthen the documentation process and procedures using only the limited information given above.

3. Provide specific recommendations on how to overcome the discovered potential weaknesses on the organizational structure and authority of the company.

plumfish833

Stanley & Sons Inc. (the âCompanyâ) assists clients by designing and implementing solutions that reduce the overall costs of its customersâ supply chains. The Company provides Just-In-Time (JIT) inventory management of spare parts used in its customersâ manufacturing processes to reduce cycle times and lower inventory-related costs. The Company entered into a supply management contract (the âAgreementâ) with Tadduni Partners (the âCustomerâ), an unrelated third party, to provide spare parts management services, including sourcing, procurement, repair, transport and delivery, and warehouse management. The key terms of the agreement are as follows: Purchase Process â¢ A Customer provides the Company with a plan at the beginning of the year with a forecast of spare parts that it needs as part of its manufacturing process. On the basis of this plan, the Company purchases spare parts from third-party vendors and ships the spare parts directly to the Customerâs location. The Agreement states that the Customer determines the product and service specifications and that no changes or modifications can occur without the Customerâs consent. The Company purchases spare parts directly from vendors. Note that although the Company purchased the spare parts according to the plan, the Customer is not obligated or committed to purchase these spare parts. â¢ The Company directly purchases from third-party vendors; the Customer is not involved in the purchasing process. Vendors name the Company in their invoices; the Customer is not named in the invoice. The Company is responsible for all payments to its vendors in purchasing the spare parts. â¢ When space parts are purchased by the Company, the vendor ships the spare parts directly to the Customerâs warehouse; however, the Customer does not purchase and obtain title to the spare parts in its warehouse until it issues a purchase order (P.O.) to the Company. At this point, the title of the inventory for which a P.O. has been authorized transfers from the Company to the Customer. â¢ The Company is responsible for the quality of the product sold to the Customer, who has the right to return any defective product to the Company. â¢ Purchase of spare parts by the Company is generally made in advance of receiving a P.O. from the Customer, and the Company is obligated to pay the vendors within the agreed-upon payment terms irrespective of whether the spare parts are sold to the Customer or payment is collected from the Customer. â¢ The Company has latitude in vendor selection and negotiates pricing with its vendors. The Company sets the price it charges the Customer on the basis of the Case 17-5c: Stanley & Sons Page 2 Copyright 2015 Deloitte Foundation All Rights Reserved. Companyâs cost plus a predetermined mark-up. If the Company is able to achieve certain cost savings for the Customer (on the basis of its ability to negotiate pricing with its vendors), it is entitled to bonus payments that are based on a percentage of such savings. Therefore, the better the Company does in negotiating savings for the Customer, the greater the margin it earns on each sale. â¢ Spare parts inventory that is not purchased by the Customer as part of the P.O. process (because parts are obsolete or requirements have changed) remain the property of the Company. If the Company is not able to sell the inventory to other parties, the Customer will reimburse the Company for 50 percent of the cost of the unsold parts. Warehouse Operations â¢ The spare parts are held in the Customerâs warehouse, allowing immediate access to the spare parts, which avoids the cost of storage for the Company. â¢ Although inventory is held in the Customerâs warehouse, risk of loss or damage remains with the Company, and insurance is paid for by the Company. â¢ The Company has dedicated employees stationed at each Customerâs warehouse. These employees handle the day-to-day issues with spare parts received into the warehouse. â¢ The Companyâs and Customerâs inventory systems are interfaced, allowing the Company to monitor stock levels. Shipping Terms â¢ As noted above, the spare parts are shipped directly from the vendors to the Customerâs warehouse. The Company retains title and risk of loss during shipping and at the Customerâs warehouse until a P.O. is issued by the Customer to purchase the spare parts. After the Customer issues the P.O., the title transfers, and the Company recognizes revenue. Company Fee â¢ The Company receives 5.5 percent as a âconsumption feeâ for spare parts that are consumed (i.e., purchased) by the Customer from the warehouse. In addition, as noted above, the Company earns other fees according to its ability to negotiate favorable pricing on the spare parts. Required: â¢ How should the Company report revenue related to this arrangement?

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ACCT 3280 Chapter Notes - Chapter 13: Shipping List, Accounts Payable, Purchase Order

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