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

PURCHASE RETURN PROCESS (STUDY OBJECTIVE 3)

Occasionally, the company may reject goods received and initiate the purchase return process. This may occur for a variety of reasons, including the following:

1. Goods received are unacceptable due to these situations:
   • Quantity or quality discrepancies
   • Damage or defects
   • Errors in the type of goods delivered or ordered
   • Discrepancies in the terms of the purchase
   • Timing issues
2. Changes in the company's needs regarding future sales or production.

The unacceptable-goods circumstances noted in the first item listed are typically detected immediately, since goods are inspected upon receipt. Sometimes, however, unacceptable goods may be discovered at a later date, especially in the case of defective goods, quality discrepancies, and purchase terms discrepancies. Changes in company needs, the second item, may occur at any time, as the company may have unforeseen changes in its business activities. Regardless of the reason for rejecting a purchase or the timing of the return, a company must have specific procedures in place for handling its returns to a vendor. Exhibit 9-9 presents a business process map of the activities related to purchase return transactions. Exhibit 9-10 is a document flowchart showing the records used in the purchase return process, and Exhibit 9-11 shows a data flow diagram of purchase returns. These exhibits depict a return process whereby the items being returned had been received and accepted at an earlier time, rather ...