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The following describes the expenditure cycle manual procedures for a hypothetical company. The inventory control clerk examines the inventory records for items that must be replenished and prepares a two-part purchase requisition. Copy 1 of the requisition is sent to the purchasing department, and Copy 2 is filed.
Upon receipt of the requisition, the purchasing clerk selects a supplier from the valid vendor file (reference file) and prepares a three-part purchase order. Copy 1 is sent to the supplier, copy 2 is sent to the accounts payable department where it is filed temporarily, and copy 3 is filed in the purchases department.
A few days after the supplier ships the order, the goods arrive at the receiving department. They are inspected, and the receiving clerk prepares a three-part receiving describing the number and quality of the items received. Copy 1 of the receiving report accompanies the goods to the stores, where they are secured. Copy 2 is sent to inventory control, where the clerk posts it to the inventory record and files the document. Copy 3 is sent to the accounts payable department, where it is filed with the purchase order.
A day or two later, the accounts payable
clerk receives the supplier’s invoice (bill) for the items shipped. The clerk pulls the purchase order and receiving report from the temporary file and compares the quantity ordered, quantity received, and the price charged. After reconciling the three documents, the clerk enters the owed to the accounts payable subsidiary account.
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