Accounts And Classes Of Transactions In The Acquisition And Payment Cycle
Accounts and Classes of transactions in the Acquisition and Payment Cycle.
The objective is to evaluate whether the accounts affected by acquisitions of goods and services and cash disbursement for those that are fairly presented in accordance with accounting standards. There are 3 classes of transactions included in the cycle:
1. Acquisitions of goods and services
2. Cash disbursements
3. Purchase returns and allowances and discounts
There are 10 accounts involved in the acquisition and payment cycle (you can see it in page 614 figure 18-1). It is not surprising that in this cycle, it will take more time than any other cycle.
Business Function in the Cycle and Related Documents and Records
Acquisition and payment cycle involves the decisions and processes necessary for obtaining the goods and services for operating business. The cycle begins with initiation of a purchase requisition of a product and ended with payment account payable.
Processing Purchase Orders
The exact form of the request and the required approval depend on the nature of the products and the company policy. The common documents include:
1. Purchase Requisition: used to request products by an authorized employee. Companies often rely on pre-specified reorder points used by the computer to initiate inventory purchase requisition automatically.
2. Purchase Order: document to order products from vendors and companies usually submit these document electronically to vendors under an agreement for electronically data interchange
Receiving Goods and Services
The receipt from the vendors is a critical point in the cycle because it’s when most companies recognize the acquisition and related liability on their own records. Receiving Report is a document prepared when goods are received and it also included with goods description, goods quantity, date received and other relevant data.
Recognizing the Liability
The proper liability recognition for receipt of goods and services requires prompt and accurate
The objective is to evaluate whether the accounts affected by acquisitions of goods and services and cash disbursement for those that are fairly presented in accordance with accounting standards. There are 3 classes of transactions included in the cycle:
1. Acquisitions of goods and services
2. Cash disbursements
3. Purchase returns and allowances and discounts
There are 10 accounts involved in the acquisition and payment cycle (you can see it in page 614 figure 18-1). It is not surprising that in this cycle, it will take more time than any other cycle.
Business Function in the Cycle and Related Documents and Records
Acquisition and payment cycle involves the decisions and processes necessary for obtaining the goods and services for operating business. The cycle begins with initiation of a purchase requisition of a product and ended with payment account payable.
Processing Purchase Orders
The exact form of the request and the required approval depend on the nature of the products and the company policy. The common documents include:
1. Purchase Requisition: used to request products by an authorized employee. Companies often rely on pre-specified reorder points used by the computer to initiate inventory purchase requisition automatically.
2. Purchase Order: document to order products from vendors and companies usually submit these document electronically to vendors under an agreement for electronically data interchange
Receiving Goods and Services
The receipt from the vendors is a critical point in the cycle because it’s when most companies recognize the acquisition and related liability on their own records. Receiving Report is a document prepared when goods are received and it also included with goods description, goods quantity, date received and other relevant data.
Recognizing the Liability
The proper liability recognition for receipt of goods and services requires prompt and accurate