Outline the key steps taken in the purchasing system

Answer 1

Inventory control monitors inventory and authorizes restocking with a purchase requisition. A copy is retained and one is sent to accounts payable.

Purchasing acts on the purchase requisition and prepares a purchase order. The original is sent to a vendor. Copies go to inventory control and accounts payable. A blind copy is sent to receiving and another is filed in purchasing.

When the goods are received, the receiving staff count and inspect the goods. The blind purchase order tells what goods were ordered. The count is a significant control check. Receiving prepares a receiving report. One copy accompanies the goods to the storeroom. Other copies go to purchasing, inventory control, and accounts payable.

Accounts payable reconciles the purchase requisition, purchase order and receiving report. When the vendor invoice arrives, it is examined thoroughly and reconciled and if all documents agree, the transaction is recorded in the purchases journal and the accounts payable subsidiary ledger. The information is filed until the time arises to make payment.

The general ledger department receives a journal voucher from accounts payable and a summary from inventory control. The inventory and accounts payable control accounts are updated.