Overview
Purchase processing and cash disbursements procedures constitute the expenditure cycle for most retail, wholesale and manufacturing organizations.
Purchase processing procedures
Purchases procedures include the tasks involved in identifying inventory needs, placing the order, receiving the inventory and recognizing the liability. In general, these procedures apply to both manufacturing and retailing firms. It differs only in the way purchases are authorized. | Manufacturing firms | Merchandising firms | Purchase authorization | Production planning and control function | Inventory control function |

Monitor inventory records
The inventory control monitors and records finished goods inventory levels, when inventories drop to a predetermined reorder point, a purchase requisition is prepared and sent to the prepare purchase order function to initiate the purchase process.
Prepare purchase order
The prepare purchase order function receives the purchase requisitions, which are sorted by vendor if necessary. Next, a purchase order (PO) is prepared for each vendor. A copy of the PO is sent to the vendor. In addition, a copy sent to the set up of accounts payable (AP) function for filing temporarily in the AP pending file and a blind copy is sent to the receive goods function, where it is held until the inventories arrive. The last copy is filed in the open/closed purchase order file.
Receive Goods The next event in the expenditure cycle is the receipt of the inventory. Goods arriving from the vendor are reconciled with the blind copy of the PO. Blind copy contains no quantity or price information about the products being received. This is an important device to verify the quantity and condition of goods.
Upon completion of the physical count and inspection, the receiving clerk prepares a receiving report. One copy of the receiving report