Accounting Information Systems: The Processes and Controls, 2nd Edition

INTRODUCTION TO EXPENDITURES PROCESSES (STUDY OBJECTIVE 1)

In a large company, there may be thousands of purchasing transactions occurring each day. The company must have systems and processes in place to capture, record, summarize, and report these transactions. The processes are the policies and procedures that employees follow in completing the purchase of goods or materials, capturing vendor data and purchase quantities, and routing the resulting purchasing documents to the proper departments within the company. Exhibit 9-1 highlights the expenditures processes section of the overall accounting system.

When a purchase occurs, the information resulting from that purchase must flow into the purchase recording systems, the accounts payable and cash disbursement systems, and the inventory tracking systems. In IT accounting systems, these recording and processing systems are called transaction processing systems (TPS). Thus, there is a set of processes within the company to conduct purchases and route purchasing information, and there is a TPS within the IT system to record, summarize, and report these purchasing transactions.

Every company acquires materials or goods and must therefore have expenditures. It is a fundamental process of all businesses as they buy the resources needed to conduct operations, record the resulting liability, and eventually pay cash to the vendor. This process is somewhat similar to the revenue processes discussed in Chapter 8, except that goods and cash ...