1

Chapter 1

Introduction to Accounting Information

Systems

Chapter 12

The Purchasing/

Accounts Payable/

Cash Disbursement (P/AP/CD) Process

Learning Objectives

• Know definitions/basic functions of P/AP/CD

• Relationship between P/AP/CD & environment

• Logical/physical characteristics of P/AP/CD

• Special requirements of payroll process

• Technology to implement P/AP/CD

• System control goals and plans for P/AP/CD

3

Expenditure cycle (merchandising)

P/AP/CD process

Inventoryprocess

Payroll

Generalledger

Expenditure

Cycle

4

Vertical perspective - P/AP/CDVP

Finance

Treasurer

Cashier

Controller

Supervisor,payroll

Supervisor,accounts payable

Supervisor,receiving

Buyers

Warehousemanager

Purchasingmanager

VPLogistics

Horizontal information flows

5

6

Horizontal Information Flows

• Purchase requisition from inventory control to purchasing

• Requisitions from other depts. to purchasing

• Purchase order to vendor

• PO notification to other depts. or inventory

• PO notification to receiving

• PO notification to accounts payable

• Goods/services received from vendor

7

Horizontal Information Flows (2)

• Receiving notification to accounts payable

• Receiving notification to purchasing

• Invoice received from vendor

• Approved voucher to cashier

• AP notification & inventory cost info to GL

• Check to vendor by cashier

• Paid voucher to accounts payable

• Notification of cash disbursement to GL

8

Inventoryprocess

Variousdepts.

GeneralLedger

Vendor

GeneralLedgerSystem

Vendor

Carrier

Warehouse

PO master data

Vendor master data

1.0Ordergoods

& services

2.0Receivegoods

& services

3.0Establishpayable

4.0Make

paymentVendor master data

AP Master data

Inventory master

Disbursement eventdata

Inventory'spurchase

requisition

Notification

Purchaseorder

Vendoracknowledgement

POreceiving

notificationReceiving reports

Vendorpacking

slip

Stocknotice

Receivingreport

PO accountspayable

notification

GL payableupdate

Purchaserequisition

POnotification

Vendorinvoice

Vendorpayment

GL cashdisbursement

updateEmployee

Employeepayment

Employeetime

record

Inventorymaster data

Payroll data

GL inventoryrec'd update

Inventory master data

9

10

ER diagram - P/AP/CD

11

12

13

14

15

Control Goals of the Business Process

Ensure effectivenessof operations by

achieving the followingprocess goals

Ensureefficientemploy-ment of

resources

Ensuresecurity

ofresources

Control Goals of the Operations Process

Control Goals of the Information Process

For purchaserequisition

Inputs, ensure:

For purchaseorder masterdata, ensure

For vendorpacking slip

inputs,ensure:

For P.O.master data,

ensure

A B C D IV IC IA IV IC IAUC UA UC UA

P-1

Purchasing Subsystem Receiving Subsystem

RecommendedControl Plans

P-1: Requisition audit data

P-2: Authorized vendor data P-2P-2 P-2P-3: Requisition confirmation to originating department

P-3

P-4: Approve vendor selection P-4 P-4

P-6: Independent validation of vendor invoice

P-5P-5: Independent authorization to make payment

P-6P-7: Vendor invoice math accuracy check

IV = input validity

IC = input completeness

IA = input accuracy

UC = update completeness

UA = update accuracy

Key: possible system goals:

A – Select vendor – best quality, lowest price by promised delivery dataB – Ensure that right goods in acceptable condition receivedC – Optimize cash discountsD – Ensure sufficient but not excessive cash

16

Control Goals of the Business Process (Continued)

Ensure effectivenessof operations by

achieving the followingprocess goals

Ensureefficientemploy-ment of

resources

Ensuresecurity

ofresources

Control Goals of the Operations Process

Control Goals of the Information Process

For vendorinvoice inputs,

ensure:

For accountspayable masterdata, ensure:

For paymentvoucher inputs,

ensure:

For A/Pmaster data,

ensure

A B C D IV IC IA IV IC IAUC UA UC UA

Payables Subsystem CD Subsystem

RecommendedControl Plans

P-1: Requisition audit data

P-2: Authorized vendor data

P-3: Requisition confirmation to originating departmentP-4: Approve vendor selection

P-6: Independent validation of vendor invoice

P-5: Independent authorization to make payment

P-7: Vendor invoice math accuracy check

IV = input validity

IC = input completeness

IA = input accuracy

UC = update completeness

UA = update accuracy

Key: possible system goals:

A – Select vendor – best quality, lowest price by promised delivery dataB – Ensure that right goods in acceptable condition receivedC – Optimize cash discountsD – Ensure sufficient but not excessive cash

P-5P-5

P-6P-6

P-7

Learning Objectives

• Know definitions/basic functions of P/AP/CD

• Relationship between P/AP/CD & environment

• Logical/physical characteristics of P/AP/CD

• Special requirements of payroll process

• Technology to implement P/AP/CD

• System control goals and plans for P/AP/CD