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    AIS James Hall Chapter 5 Problem 8 Answer Key

    Uploaded by

    Precious Anne Cantaros
    The document summarizes issues with missing or incomplete documentation in various departments of an organization's purchasing and accounts payable processes. Key documents like purchase orders, receiving reports, and invoices are missing from receiving, inventory, accounts payable, cash disbursements, and general ledger departments. As a result, critical processes like recording liabilities, reconciliations, verifications and postings cannot be properly completed. Proper documentation is needed to ensure an accurate audit trail and compliance with accounting standards.

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    AIS James Hall Chapter 5 Problem 8 Answer Key

    Uploaded by

    Precious Anne Cantaros
    1K views3 pages
    The document summarizes issues with missing or incomplete documentation in various departments of an organization's purchasing and accounts payable processes. Key documents like purchase orders, receiving reports, and invoices are missing from receiving, inventory, accounts payable, cash disbursements, and general ledger departments. As a result, critical processes like recording liabilities, reconciliations, verifications and postings cannot be properly completed. Proper documentation is needed to ensure an accurate audit trail and compliance with accounting standards.

    Original Description:

    Answer ro Problem 8

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    The document summarizes issues with missing or incomplete documentation in various departments of an organization's purchasing and accounts payable processes. Key documents like purchase orders, receiving reports, and invoices are missing from receiving, inventory, accounts payable, cash disbursements, and general ledger departments. As a result, critical processes like recording liabilities, reconciliations, verifications and postings cannot be properly completed. Proper documentation is needed to ensure an accurate audit trail and compliance with accounting standards.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    1K views3 pages

    AIS James Hall Chapter 5 Problem 8 Answer Key

    Uploaded by

    Precious Anne Cantaros
    The document summarizes issues with missing or incomplete documentation in various departments of an organization's purchasing and accounts payable processes. Key documents like purchase orders, receiving reports, and invoices are missing from receiving, inventory, accounts payable, cash disbursements, and general ledger departments. As a result, critical processes like recording liabilities, reconciliations, verifications and postings cannot be properly completed. Proper documentation is needed to ensure an accurate audit trail and compliance with accounting standards.

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    The key takeaways are the importance of proper documentation and record keeping across departments to ensure accountability and an audit trail of economic events.

    The receiving department needs a blind copy of the purchase order to know the supplier details and expected quantities and costs of items being received.

    When an invoice arrives, the AP clerk reconciles the financial information with the receiving report and purchase order in a three-way match to verify what was ordered, received, and priced before recording the transaction.

    Precious Anne M.

    Cantaros A-22

    Mr. Lyndon Regodon, C.P.A.

    1. The Receiving Department (PO Blind Copy) and Accounts Payable doesn't have/did not receive any
    copy of the Purchase Order.

    Explanation:

    -Based on the Accounting Records, these records capture the economic essence of transactions and
    provide an audit trail of economic events.

    A/P Dept.: It is very important for other departments to have a copy of the PO for them to know the
    name and address of the primary supplier, the economic order quantity of the item, and the standard or
    expected unit cost of the item.

    Receiving Dept.: When goods arrive from the supplier, receiving clerks must inspect items for proper
    quantities and condition (damage, spoilage, and so on). For this reason, the receiving clerk receives a
    blind copy of the original PO from purchasing. A blind PO has all the relevant information about the
    goods being received except for the quantities and prices,

    2. The Stores, A/P Dept., and Inventory Control do not have any copy of the Receiving Report.

    Explanation:

    -It is needed under the Accounting Records as it provides an audit trail of economic events.

    - The receiving clerk must prepare the receiving report because it states the quantity and condition of
    the inventories and to know whether the goods received conforms with the order.

    3. There is no filed copy of the PO, RR, and Invoice under the Cash Disbursements Dept. which is used as
    a basis in making the check.

    Explanation:

    Independent Verification: An individual who is not directly involved in the previous transactions must
    verify and check the documents to see whether there are errors or misrepresentations.

    Accounting Records: These documents also serve as an audit trail.

    -The cash disbursements clerk receives the voucher packet and reviews the documents for completeness
    and clerical accuracy.
    4. The Inventory Control has no purchase requisition.

    Explanation:

    Transaction Authorization: It must be ensured that all material transactions processed by the
    information system are valid and in accordance with management's objectives.

    -The inventory control function continually monitors inventory levels. As inventory levels drop to their
    predetermined reorder points, inventory control formally authorizes replenishment with a purchase
    requisition.

    5. The AP Dept. did not record/post their liability also because of the lacking files (PO and RR) hence, no
    reconciliation happened.

    Explanation:

    Independent Verification: An individual who is not directly involved in the previous transactions must
    verify and check the documents to see whether there are errors or misrepresentations.

    Accounting Records: These documents also serve as an audit trail.

    Physical Control: Either manually or with the physical use of computers, transactions must be recorded,
    hence, liability recognized/posted.

    -When the invoice arrives, the AP clerk reconciles the financial information with the receiving report and
    PO in the pending file. This is called a three-way match, which verifies that what was ordered was
    received and is fairly priced. Once the reconciliation is complete, the transaction is recorded in the
    purchases journal and posted to the supplier’s account in the AP subsidiary ledger.

    6. The General Ledger lacks the needed files and there are no summary and journal ledger, hence, no
    posting and reconciliation happened.

    Explanation:

    Independent Verification: An individual who is not directly involved in the previous transactions must
    verify and check the documents to see whether there are errors or misrepresentations.

    -The general ledger function receives a journal voucher from the AP department and an account
    summary from inventory control. The general ledger function posts from the journal voucher to the
    inventory and AP control accounts and reconciles the inventory control account and the inventory
    subsidiary summary. The approved journal vouchers are then posted to the journal voucher file. With
    this step, the purchases phase of the expenditure cycle is completed.

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