Introduction to Acquisition and Payment Cycle | Auditing and Attestation | CPA Exam

In this session, I will discuss acquisition and payment cycle.
✔️Accounting students and CPA Exam candidates, check my website for additional resources: https://farhatlectures.com/
📧Connect with me on social media: https://linktr.ee/farhatlectures

#cpaexam #accountingstudent #auditcourse

Purchase Requisition
A purchase requisition is used to request goods and services by an authorized employee. This may take the form of a request for such acquisitions as materials by production staff or the storeroom supervisor, outside repairs by office or plant personnel, or insurance by the vice president in charge of property and equipment.
Purchase Order
A purchase order is a document used to order goods and services from vendors. It includes the description, quantity, and related information for goods and services the company intends to purchase and is often used to indicate authorization of the acquisition. Companies often submit purchase orders electronically to vendors who have made arrangements for electronic data interchange (EDI).
A receiving report is a paper or electronic document prepared at the time goods are received. It includes a description of the goods, the quantity received, the date received, and other relevant data.
A vendor’s invoice is a document received from the vendor and shows the amount owed for an acquisition. It indicates the description and quantity of goods and services received, price (including freight), cash discount terms, date of the billing, and total amount.
A debit memo is also a document received from the vendor and indicates a reduction in the amount owed to a vendor because of returned goods or an allowance granted. It often takes the same form as a vendor’s invoice, but it supports reductions in accounts payable rather than increases.
A voucher is commonly used by organizations to establish a formal means of recording and controlling acquisitions, primarily by enabling each acquisition transaction to be sequentially numbered. Vouchers include a cover sheet or folder for containing documents and a package of relevant.
cquisitions Transaction File
This is a computer-generated file that includes all acquisition transactions processed by the accounting system for a period, such as a day, week, or month. It contains all information entered into the system and includes information for each transaction, such as vendor name, date, amount, account classification or classifications, and description and quantity of goods and services purchased. The file can also include purchase returns and allowances or there can be a separate file for those transactions.
The acquisitions journal or listing, often referred to as the purchases journal, is generated from the acquisitions transaction file and typically includes the vendor name, date, amount, and account classification or classifications for each transaction, such as repair and maintenance, inventory, or utilities. It also identifies whether the acquisition was for cash or accounts payable.
An accounts payable master file records acquisitions, cash disbursements, and acquisition returns and allowances transactions for each vendor. The master file is updated from the acquisition, returns and allowances, and cash disbursement computer transaction files. The total of the individual account balances in the master file equals the total balance of accounts payable in the general ledger.
An accounts payable trial balance listing includes the amount owed to each vendor or for each invoice or voucher at a point in time. It is prepared directly from the accounts payable master file.
A vendor’s statement is a document prepared monthly by the vendor that indicates the beginning balance, acquisitions, returns and allowances, payments to the vendor, and ending balance. These balances and activities are the vendor’s representations of the transactions for the period, not the client’s. Except for disputed amounts and timing differences, the client’s accounts payable master file should be the same as the vendor’s statement.
Check
This document is commonly used to pay for the acquisition when payment is due. Most companies use computer-prepared checks based on information included in the acquisition transactions file at the time goods and services are received. Checks are typically prepared in a multi-copy format, with the original going to the payee, one copy filed with the vendor’s invoice and other supporting documents, and another filed numerically. In most cases, individual checks are recorded in a cash disbursements transaction file.