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Expenditure Cycle

Operations

Prepared by Resyl Sheen S. Campo

Accounting Information System

Meaning

The expenditure cycle is a recurring set of business activities and related information processing operations associated with the purchase of and payment for goods and services.

Meaning

primary external exchange of information

is with suppliers (vendors)

Primary Objective

Primary objective

in the expenditure cycle is to minimize the total cost of acquiring and maintaining inventories, supplies, and the various services the organization needs to function.

Four Basic Expenditure Cycle Activities

  • Ordering materials, supplies, and services
  • Receiving materials, supplies, and services

Basic Expenditure

  • Approving supplier invoices
  • Cash disbursements

6

Receiving

7

3

1

Purchasing

Stores

Vendor

Stores

Diagram

10

2

5

9

11

13

A/P

8

12

Cash Payment

Vendors Data

1.

Purchase requisition sent from inventory control department to purchasing department.

Expenditure Cycle

2.

Purchase requisitions from various other departments sent to purchasing department.

Purchase requisition

A purchase requisition form is an internal document used by an employee to purchase goods or services on behalf of their firm.

Purchase Requisition

3.

Purchase order sent to vendor.

3

Purchase Order

A purchase order is a document sent from a purchaser to a vendor to confirm a specific purchase of goods or services.

4.

Purchase order notification sent to various other departments or to inventory control department.

4

5.

Purchase order notification sent to receiving department.

6.

Purchase order notification sent to accounts payable department.

6

7.

Goods and Services received from vendor.

8.

Receiving notification sent to accounts payable department.

8

9.

Receiving notification sent to purchasing department.

10.

Invoice received from vendor.

11.

Approved voucher sent to cashier.

10

12.

Accounts payable notification and inventory cost information sent to general ledger system.

Voucher

A voucher is essentially the backup documents for accounts payable, which are bills owed by companies to vendors and suppliers.

Payment Voucher

13.

Check sent to vendor by cashier.

Check

A check is a written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer.

Check

14.

Paid voucher returned to accounts payable department.

Cash Disbursement

A cash disbursement journal is a record of a company's internal accounts that itemizes all financial expenditures made with cash or cash equivalents.

Cash Disbursement

15.

Notification of the cash disbursement sent from cashier to general ledger system.

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