Reference no: EM13971382

Expenditure Cycle for a Hypothetical Company

The following describes the expenditure cycle for a hypothetical company. The company has a centralized computer system with terminals located in various departments. The terminals are networked to a computer application, and digital accounting records are hosted on a server in the data processing department. Each day, the computer in the data processing center scans the inventory records looking for items that must be replenished. For each item below its reorder point, the system creates a digital purchase order and prints two hard copies. A technician in the data center sends the purchase orders to the purchasing department clerk. Upon receipt of the purchase orders, the purchasing clerk reviews and signs them. He sends Copy 1 to the supplier and files Copy 2 in the purchases department. A few days later, the supplier ships the order and the goods arrive at the receiving department. The receiving clerk reviews the digital purchase order from his terminal, inspects the goods, creates a digital Receiving Report record, and prints two hard copies of the receiving report. The system automatically updates the inventory records to reflect the receipt of goods. The clerk sends Copy 1 of the receiving report with the goods to the stores, where they are secured. Copy 2 is filed in the receiving department. A day or two later, the accounts payable clerk receives a hard-copy supplier's invoice (bill) for the items shipped. The clerk accesses the digital receiving report and purchase order from her terminal. She then reconciles these documents with the supplier's invoice. If all aspects of the order reconcile, the clerk records the purchase in the digital purchases journal and posts the amount owed to the accounts payable subsidiary account from her terminal. Each day, the computer application in the data processing department automatically scans the accounts payable subsidiary file for items that are due for payment and prints a two-part check. The system closes out the accounts payable record and creates a record in the digital cash disbursements journal. A data processing clerk then sends the check to the Cash Disbursement department where it is approved, signed, and distributed to the supplier. The check copy is filed in the Cash Disbursements department.

Required

Prepare a data flow diagram and a system flowchart of the expenditure cycle procedures previously described.