Question

The Poster Company is a beauty and barber supplies and equipment distributorship servicing a five- state area. Management generally has been pleased with the overall operations of the company to date. However, the present purchasing system has evolved through practice rather than having been formally designed. Consequently, it is inadequate and needs to be redesigned. A description of the present purchasing system is as follows: Whenever the quantity of an item is low, the inventory supervisor phones the purchasing department with the item description and quantity to be ordered. A purchase order is prepared in duplicate in the purchasing department. The original is sent to the vendor, and the copy is retained in the purchasing department filed in numerical order. When the shipment arrives, the inventory supervisor sees that each item received is checked off on the packing slip that accompanies the shipment. The packing slip is then forwarded to the accounts payable department. When the invoice arrives, the packing slip is compared with the invoice in the accounts payable department. Once any differences between the packing slip and the invoice are reconciled, a check is drawn for the appropriate amount and is mailed to the vendor with a copy of the invoice. The packing slip is attached to the invoice and filed alphabetically in the paid invoice file.

Required
The Poster Company intends to redesign its purchasing system from the point in time when an item needs to be ordered until payment is made. The system should be designed to ensure that all the proper controls are incorporated into the system.
a. Identify the internally and externally generated documents that would be required to satisfy the minimum requirements of a basic system, and indicate the number of copies of each document that would be needed.
b. Explain how all these documents should interrelate and flow among the various departments, including the final destination or file for each copy.



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  • CreatedFebruary 26, 2015
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