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

PURCHASING PROCESSES (STUDY OBJECTIVE 2)

The business process map in Exhibit 9-3 illustrates the flow of activities in a typical purchasing system. Exhibit 9-4 is a document flowchart depicting the related records used in a purchasing system. Exhibit 9-5 is a data flow diagram of the purchasing processes. This process begins when an employee of the company recognizes the need to make a purchase, typically as a result of observing low inventory levels or unfilled sales orders. Purchasing needs may change daily with the occurrence of shipping and receiving transactions, production transfers, and new sales orders. It may be that a warehouse attendant notices a particularly low stock level, an accountant detects potential shortages in documented inventory quantities, an operations manager becomes aware of additional quantities that will be needed to produce upcoming sales orders, or an IT system signals when an order is necessary. Regardless of the manner in which the purchase is initiated, the appropriate purchase requisition form should be prepared to document the need and request that the specific items and quantities be purchased. A purchase requisition must then be authorized by a designated member of management. The purchase requisition triggers the next steps in the purchase process.

Once a purchase requisition has been approved, it will be forwarded to the purchasing department within the company, where a purchase order form is prepared. A purchase order (PO) is a document ...