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The three underlying business activities in the expenditure cycle are:
1) Ordering goods, supplies, and services
The
major
key
decisions
made
in
this
first
step
are
identifying
what,
when,
and
how
much
to
purchase,
as
well
as
identifying
from which
supplier
to
purchase. Purchase requisition and purchase orders are generated in this initial
stage of EC.
2) Receiving and storing goods, supplies, and services
This second major business activity in the EC includes tasks such as:
i. Accepting deliveries from suppliers.
ii. Making reports on goods, supplies, and services received.
iii. Storing the goods.
iv.
Communicating
information about the
receipt
of ordered
merchandise to
the inventory control function to update the inventory records.
The receiving department (function) itself has two core responsibilities:
o
Deciding
whether
to
accept
a
delivery
based
on
the existence of
a
valid
purchase order.
o
Verifying
the
quantity
and quality
of
the
goods
delivered
to
ensure
that
the firm pays only for goods actually received and that inventory records
are accurately updated.
3) Paying for goods, supplies, and services
This third primary activity of the EC involves two steps:
i. Approve vendor invoices for payment.
ii. Pay approved invoices.
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