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Review Questions
2. What primary functions does the purchasing process perform? Explain each function.
Handle the repetitive work routines of the purchasing department and the
receiving department.
Support the decision needs of those who manage the purchasing and
receiving departments.
Assist in the preparation of internal and external reports.
First, the purchasing process handles the repetitive work routines of the purchasing
and receiving departments by capturing and recording data related to the day-to-day
operations of the departments. The recorded data then may be used to generate
source documents (such as purchase orders and receiving reports) and to produce
internal and external reports.
3. With what internal and external entities does the purchasing process interact?
6. Describe the five basic components of the Supply Chain Operations Reference (SCOR)
Model.
Plan: Measure customer demand for a product or service and develop a
course of action to source, produce, deliver, and, if necessary, return the
product or service.
Source: Select supply sources and procure the goods and services to meet the
planned or actual demand, receive product, and authorize payments to
suppliers.
Make: Transform a product to a finished state to meet planned or actual
demand.
Deliver: This is the order fulfillment step. Receive customer orders, provide
goods or services to customers, and invoice customers.
Return: Perform post-delivery customer support and receive defective or
excess products back from customers.
7. How does supply chain management software support supply chain management?
Supply chain management software helps an organization execute the steps in the
supply chain. Software products are available to perform individual functions within
each of the five steps in SCM and products are available to perform complete steps or
several of the steps.
An organization in the chain can relay a false demand signal. For example, a retailer
could misread retail demand and double its normal order. Assume further that the
wholesaler in response doubles its normal order (now four times the retail order) and
so on up the chain to the manufacturer and its supplier. The multiplication of these
orders up the supply chain can cause wild demand and supply fluctuations known as
the bullwhip effect.
10. What three major logical processes
does the purchasing process
perform? Describe each process.
Radio-Frequency Identification (RFID) is a system for sending and receiving data, using
wireless technology, between an RFID tag and an RFID transceiver. RFID tags are
computer chips with an antenna that contains information about the object to which it
is attached. Active RFID tags store information using a power source within the tag,
and passive tags obtain their power from a transceiver. Transceivers transmit, receive,
and decode data from RFID tags.
12. What types of frauds are typically found in the purchasing process?
13. What are the typical effectiveness goals of the purchasing process? Provide an example
illustrating each goal.
Purchasing and receiving operations goals both contained in Figure 1213 both play a vital role
in effectiveness.
(GOAL A) Purchasing operations goal - assist in sustaining other functional
departments, help with generating a stable end consistent flow of supply through
supplier selection, assist in punctuality of deliveries, end reduce returns, ordering cost,
cost of items procured and payments.
(GOAL B) Receiving operations goals - handle only approved receipts, rapidly alert
other functional departments of receipts, punctuality promote items to the
storehouse, reduce materiel handling cost rates, and quickly eliminate substandard or
flawed items.
14. What characterizes a valid purchase order input? What characterizes a valid vendor
packing slip input?
15. What are the key control plans associated with the purchasing process? Describe how
each works and what it accomplishes.
16. Describe the impact that company level controls (i.e., control environment, pervasive
controls, and general/ IT general controls) can have on the effectiveness of purchasing
business process controls.
Chapter 13: The Accounts Payable/Cash Disbursements (AP/CD) Process
Review Questions
2. What primary functions does the AP/ CD process perform? Explain each function.
Handle the repetitive work routines Of the accounts payable department and the
cashier.
Support the decision needs of those who manage the accounts payable department
and cashier.
Assist in the preparation of internal and external reports.
3. With what internal and external entities does the AP/CD process interact?
4. What are the fundamental responsibilities of the accounts payable department and the
cashier?
The accounts payable department is responsible for processing invoices received from
vendors, preparing payment vouchers for the subsequent disbursement of cash for
goods or services received, and recording purchase and disbursement events.
The cashier has custody of the organization's cash and executes the payments
authorized by the accounts payable department.
5. What major logical processes does the AP/ CD process perform? Explain each.
Establish Payable - The first step in establishing the payable involves validating the
vendor invoice. This process is triggered by receipt of the vendor invoice, a business
document that notifies the purchaser of an obligation to pay the vendor for goods (or
services) that were ordered by and shipped to the purchaser.
Make Payment - The payment process is triggered by payment due-date information
residing on the accounts payable master data. As you can see, the payment process
begins with the preparation of a list of payments that might be made at this time. The
selection of items for this list is based on payment due dates and terms that may
indicate a discount can be taken for a payment at this time.
a true voucher is used in which all expenditures must be vouchered—that is, formally
recorded as a payable—before they can be paid
a non-voucher process is employed.
7. What data is contained in the purchasing events data, the accounts payable master
data, and the cash disbursements event data?
9. How does EDI improve the effectiveness and efficiency of the AP/ CD process?
- EDI can be adopted in most any business process, but it is prevalent in AP/CD
processes where cost savings can be significant, and buyers can dictate its use with
their vendors. Although often considered a dying technology, EDI continues to
find favor among a number of organizations.
10. What is EIPP? How does it improve the efficiency and effectiveness of the AP/CD
process?
- Electronic invoice presentment and payment (EIPP) systems are B2B systems that
combine e-invoicing and e-payment processes to send invoices to customers via a
Web portal or secure network using a third-party service provider and to receive
electronic payments that are initiated by the payer, processed the third party, and
settled by the ACH network, Wire transfer, or Credit Card Company.
11. What are two operations process (effectiveness) goals Of the AP / (I) process? Provide
an example illustrating each goal.
Goals A and B identify effectiveness goals that are typical of the AP/CD process.
Several processes must be in place to achieve:
- Goal A, optimize cash discounts, including processes to see that invoices are
received in a timely manner, recorded promptly upon receipt, and paid within the
discount period.
- Goal B , ensure that the amount maintained in demand deposit accounts is
sufficient (but not excessive) to satisfy cash discounts, requires that sufficient data
regarding purchases and upcoming payments is available and used to plan the
availability of cash resources.
For example, vendor invoices must be recorded with amounts due, dates, and terms
so that the treasurer can plan for payments.
12. What characterizes a valid vendor invoice input? What characterizes a valid payment
input?
- Valid vendor invoices input are those that are for goods that were actually ordered
and actually received (i.e., the invoices are supported by proper purchase orders
and receiving reports).
- Valid payment inputs are those that are documented by valid, unpaid vendor
invoices. Note that in this case, part of ensuring validity is to prevent paying an
item twice.
13. What the key control plans associated With the AP/ CD process? Describe how each
works and what it accomplishes.