Required

a. Create a document flowchart of the existing system (for the purchase process).

b. Talk about the expenditure cycle and what are the important points on it ?

Jasmine Tea! is the largest coffee distributor in the Northeast. They distribute specialty tea leaves to coffee shops, cafes, and restaurants. The company headquarters is located in Newark, New Jersey; in addition, there are two distribution warehouses located in Philadelphia and Boston. Established in 1985, the company's first warehouse was located in Newark. Jasmine Tea! began by purchasing and distributing from one Chinese tea supplier. Within two years, sales had doubled and they were seeking more varieties of tea. They now have dozens of suppliers and more than 50 varieties of tea. Currently there are 155 employees and annual sales of more than $50 million. Last year was their most successful year with an annual sales growth of 6.5 percent. Jasmine Tea! has been receiving complaints from customers and suppliers about billing, shipping, and payment problems. Under the current operating system, each department has independent computer terminals. The complaints and inefficient computer system have triggered the management team to seek alternative solutions that will enable them to better serve their customers and meet the demands. Purchasing Process: The purchasing agent monitors the inventory and decides when more tea supplies are needed. The purchasing agent begins the purchasing process by manually preparing two hard copies of a purchase requisition form. Then the clerk selects a supplier and enters the purchase requisition information into a computer terminal in the department. The computer terminal generates three hard copies of a PO. One copy is sent to the supplier, one copy is sent to the AP department, and the third copy is filed in the purchasing department. Once the purchasing agent has entered the purchase requisition information into the computer terminal, he files one copy of the purchase requisition and sends the other copy to AP. When the goods are received in Newark, the receiving department verifies them using the packing slip, which is attached to the goods. The goods are verified and sent to the warehouse for storage. The receiving clerk then updates the inventory and posts to the general ledger from a terminal in the department. AP and Cash Disbursements Procedures: The AP clerk receives the supplier's invoice and reconciles it with the purchase requisition and PO. Then the clerk posts the liability to the purchases journal and voucher register. Each day, the clerk visually searches the voucher register file from her terminal for open invoices that are due to be paid. The clerk then prepares the check. From a computer terminal, the clerk updates the check register and voucher register and posts to the general ledger. The negotiable portion of the check is mailed to the vendor, and a check copy is filed. The purchases requisition, invoice, and PO are then filed in a closed voucher file.