CHAPTER FOURTEEN

1. CHAPTER FOURTEEN THE VOUCHER SYSTEM

2. INTERNAL CONTROL OF EXPENDITURES • Management needs to see that: • Expenditures are made only for goods and services needed by the business and at a fair price. • This is done by direct involvement in small businesses. • Larger businesses must use an internal control system.

3. INTERNAL CONTROLS • Set of procedures used to ensure that there is proper accounting for all activities of the business. • Three elements: • Segregation of duties • Authorization procedures and related responsibilities • Adequate documents and records

4. SEGREGATION OF DUTIES • Different employees should be responsible for different parts of a transaction: • Provides a built-in check by one employee on another • Employees who account for transactions should not also have custody of the assets. • One employee cannot obtain goods for personal use without being caught by another employee.

5. AUTHORIZATION PROCEDURES AND RELATED RESPONSIBILITIES • Every business activity should be properly authorized. • It should be possible to identify who is responsible for every activity that has occurred.

6. ADEQUATE DOCUMENTS AND RECORDS • All business transactions should be: • Supported by a document that is • Prenumbered • Used in sequence • Subsequently accounted for • In this way, the business can be sure that it has made a record of each transaction.

7. VOUCHER SYSTEM Control technique that requires that every acquisition and subsequent payment be supported by an approved voucher Combines ALL 3 elements of internal control.

8. PURCHASING PROCESS USER DEPT Purchase Requisition Authorized person prepares requisition

9. PURCHASING PROCESS USER DEPT PURCH. DEPT Purchase Requisition Purchase Order • Purchasing department: • Reviews and approves the requisition • Prepares Purchase Order to send to supplier

10. PURCHASING PROCESS USER DEPT PURCH. DEPT RECEIVING DEPT Purchase Requisition Purchase Order Receiving Report • When the goods are received, a Receiving Report is prepared.

11. PURCHASING PROCESS USER DEPT. ACCTG. DEPT. PURCH. DEPT. RECEIVING DEPT. Purchase Requisition Purchase Order Receiving Report • Vouchers Payable section of Accounting Department receives Purchase Requisition, Purchase Order, and Receiving Report.

12. PURCHASING PROCESS USER DEPT. ACCTG. DEPT. PURCH. DEPT. MAIL-ROOM RECEIVING DEPT. Purchase Requisition Purchase Order Purchase Invoice Receiving Report • Supplier sends Purchase Invoice which is received by the mailroom and sent to the Accounting Department.

13. PURCHASING PROCESS USER DEPT. ACCTG. DEPT. PURCH. DEPT. MAIL-ROOM RECEIVING DEPT. Purchase Requisition Purchase Order Purchase Invoice Receiving Report If any aspect of the purchase is improper, it will be caught here. • Accounting Department reviews the Purchase Invoice to determine if it is: • For the goods ordered • At the correct price • For the correct quantity

14. PURCHASING PROCESS USER DEPT. ACCTG. DEPT. PURCH. DEPT. MAIL-ROOM RECEIVING DEPT. Purchase Requisition Purchase Order Voucher Purchase Invoice Receiving Report NO payment may be made without an approved voucher. • Accounting Department prepares a voucher • which is the basis for paying invoice on the due date

15. PURCHASING PROCESS USER DEPT. ACCTG. DEPT. PURCH. DEPT. MAIL-ROOM RECEIVING DEPT. Purchase Requisition Purchase Order Voucher Purchase Invoice Receiving Report • Voucher is entered into the voucher register (a special journal). Enter in Voucher Register

16. PURCHASING PROCESS USER DEPT. ACCTG. DEPT. PURCH. DEPT. MAIL-ROOM RECEIVING DEPT. Purchase Requisition Purchase Order Voucher Purchase Invoice Receiving Report Enter in Voucher Register Unpaid Voucher File • Voucher is filed by due date.

17. VOUCHER SYSTEM • Incorporates all 3 elements of internal control: • Duties are segregated • Different employees order, receive, and record the purchases. • Authorization • Required to order the goods and to prepare the voucher • Documents and Records • Every purchase is supported by a voucher, purchase invoice, receiving report, purchase order, and purchase requisition.

18. PREPARING A VOUCHER THREE STEPS

19. STEP #1 Compare the invoice with the purchase requisition, to determine that: Purchase Requisition Quantity invoiced was quantity requested

20. STEP #1 Compare the invoice with the purchase order, to determine that: Purchase Order Quantity invoiced was quantity order Also, that price and terms are proper

21. STEP #1 Compare the invoice with the receiving report to determine that: Receiving Report Quantity invoiced was quantity received

22. STEP #2 Judge whether the purchase is appropriate for the business

23. STEP #3 Verify all computations on the invoice Quantity x Price? Any discounts?

24. VOUCHER IS PREPARED On the FRONT of the voucher: Voucher Date Prenumbered 4/11/-- 1/15, n/30 Voucher No.111 Terms

25. VOUCHER IS PREPARED On the FRONT of the voucher: 4/11/-- 1/15, n/30 Voucher No.111 Due date 4/24/-- EZX Corp. 2928 Rhodes Ave. Chicago, IL 60658 Name & address of supplier

26. VOUCHER IS PREPARED On the FRONT of the voucher: 4/11/-- 1/15, n/30 Voucher No.111 4/24/-- EZX Corp. 2928 Rhodes Ave.Chicago, IL 60658 Invoice date 4/9/-- $5,700 Computers - 3 Invoice amount 3,000 Laser Printers - 3 $8,700 Description of items purchased

27. VOUCHER IS PREPARED On the FRONT of the voucher: 4/11/-- 1/15, n/30 Voucher No.111 4/24/-- EZX Corp. 2928 Rhodes Ave.Chicago, IL 60658 4/9/-- $5,700 Computers - 3 3,000 Laser Printers - 3 $8,700 Authorization Voucher Section Supervisor signs the voucher

28. VOUCHER IS PREPARED On the BACK of the voucher: Voucher No.111 Account Debited Acct No. Amount Summary Purchases 501 $8,700 Invoice $8,700 Discount 87 The accounts and amounts to be debited Net $8,613 Check No. Distribution

29. VOUCHER IS PREPARED On the BACK of the voucher: Voucher No.111 Account Debited Acct No. Amount Summary Purchases 501 $8,700 Invoice $8,700 Discount 87 Net $8,613 Check No. Distribution Acct. Dept. Supervisor approves the account distribution

30. VOUCHER IS PREPARED On the BACK of the voucher: This area is filled in at the time of payment. Voucher No.111 Account Debited Acct No. Amount Summary Purchases 501 $8,700 Invoice $8,700 Discount 87 Net $8,613 Check Amount Payment Date $8,613 4/24/-- Check No. 437 Distribution

31. VOUCHER REGISTER • A special journal used to record purchases of all types of assets and services: • Similar to an expanded purchases journal • If a Voucher Register is used, it replaces the purchases journal • Debit columns for Purchases, Supplies, Wages Expense, and General • Credit column for Vouchers Payable

32. Page 4 VOUCHER REGISTER Purchases Debit Voucher No. Issued To PR Date 1 2 • A voucher is recorded by entering the following: • Date • Voucher number • Person or business to whom the voucher is issued • Dollar amounts of debitsand credits 3 4 5 6 7 8 9 10 11

33. Page 4 VOUCHER REGISTER Purchases Debit Voucher No. Issued To PR Date 1 Triumph Leasing 106 4/2/-- 2 3 4 5 6 7 15

34. Page 7 VOUCHER REGISTER Payment Wages Exp. Debit Supplies Debit Vouchers Pay. Credit General Debit Account PR Amount Date Ck # 1 2,400 2,400 Rent Exp. 2 3 4 5 6 7 15

35. Page 4 VOUCHER REGISTER Purchases Debit Voucher No. Issued To PR Date 1 Triumph Leasing 106 4/2/-- 2 4/4/-- 107 Sam’s Cyberware 1,400 3 4 5 6 7 15

36. Page 7 VOUCHER REGISTER Payment Wages Exp. Debit Supplies Debit Vouchers Pay. Credit General Debit Account PR Amount Date Ck # 1 2,400 2,400 Rent Exp. 2 1,400 3 4 5 6 7 15

37. Page 4 VOUCHER REGISTER Purchases Debit Voucher No. Issued To PR Date 1 Triumph Leasing 106 4/2/-- 2 4/4/-- 107 Sam’s Cyberware 1,400 3 108 Compucraft, Inc. 3,300 4/4/-- 4 5 6 7 15

38. Page 7 VOUCHER REGISTER Payment Wages Exp. Debit Supplies Debit Vouchers Pay. Credit General Debit Account PR Amount Date Ck # 1 2,400 2,400 Rent Exp. 2 1,400 3 3,300 4 5 6 7 15

39. Page 4 VOUCHER REGISTER Purchases Debit Voucher No. Issued To PR Date 1 Triumph Leasing 106 4/2/-- 2 4/4/-- 107 Sam’s Cyberware 1,400 3 108 Compucraft, Inc. 3,300 4/4/-- 4 4/8/-- 109 Datasoft 2,500 5 6 7 15

40. Page 7 VOUCHER REGISTER Payment Wages Exp. Debit Supplies Debit Vouchers Pay. Credit General Debit Account PR Amount Date Ck # 1 2,400 2,400 Rent Exp. 2 1,400 3 3,300 4 2,500 5 6 7 15

41. Page 4 VOUCHER REGISTER Purchases Debit Voucher No. Issued To PR Date 1 Triumph Leasing 106 4/2/-- 2 4/4/-- 107 Sam’s Cyberware 1,400 3 108 Compucraft, Inc. 3,300 4/4/-- 4 4/8/-- 109 Datasoft 2,500 5 110 4/9/-- Bemon Office Supply 6 7 15

42. Page 7 VOUCHER REGISTER Payment Wages Exp. Debit Supplies Debit Vouchers Pay. Credit General Debit Account PR Amount Date Ck # 1 2,400 2,400 Rent Exp. 2 1,400 3 3,300 4 2,500 5 160 160 6 7 15

43. Page 4 VOUCHER REGISTER Purchases Debit Voucher No. Issued To PR Date 1 Triumph Leasing 106 4/2/-- 2 4/4/-- 107 Sam’s Cyberware 1,400 3 108 Compucraft, Inc. 3,300 4/4/-- 4 4/8/-- 109 Datasoft 2,500 5 110 4/9/-- Bemon Office Supply 6 111 8,700 EZX Corp. 4/11/-- 7 15

44. Page 7 VOUCHER REGISTER Payment Wages Exp. Debit Supplies Debit Vouchers Pay. Credit General Debit Account PR Amount Date Ck # 1 2,400 2,400 Rent Exp. 2 1,400 3 3,300 4 2,500 5 160 160 6 8,700 7 15

45. Page 4 VOUCHER REGISTER Purchases Debit Voucher No. Issued To PR Date 1 Triumph Leasing 106 4/2/-- 2 4/4/-- 107 Sam’s Cyberware 1,400 3 108 Compucraft, Inc. 3,300 4/4/-- 4 4/8/-- 109 Datasoft 2,500 5 110 4/9/-- Bemon Office Supply 6 111 8,700 EZX Corp. 4/11/-- 7 4/15/-- Payroll 112 15

46. Page 7 VOUCHER REGISTER Payment Wages Exp. Debit Supplies Debit Vouchers Pay. Credit General Debit Account PR Amount Date Ck # 1 2,400 2,400 Rent Exp. 2 1,400 3 3,300 4 2,500 5 160 160 6 8,700 7 830 830 15

47. Page 4 VOUCHER REGISTER Purchases Debit Voucher No. Issued To PR Date 1 Triumph Leasing 106 4/2/-- 2 4/4/-- 107 Sam’s Cyberware 1,400 3 108 Compucraft, Inc. 3,300 4/4/-- 4 4/8/-- 109 Datasoft 2,500 5 110 4/9/-- Bemon Office Supply 6 111 8,700 EZX Corp. 4/11/-- 7 4/15/-- Payroll 112 15 23,560

48. Page 7 VOUCHER REGISTER Payment Wages Exp. Debit Supplies Debit Vouchers Pay. Credit General Debit Account PR Amount Date Ck # 1 2,400 2,400 Rent Exp. 2 1,400 3 3,300 4 2,500 5 160 160 6 8,700 7 830 830 15 280 5,900 1,700 31,440

49. FILING UNPAID VOUCHERS • After the voucher is entered into the register: • The voucher and supporting documents are stapled together. • Filed in an unpaid vouchers file • By due date • This file functions as the Accounts Payable ledger.

50. POSTING FROM THE VOUCHER REGISTER • DAILY: • Post each amount from the General Debit column to the appropriate General Ledger account. • Insert the date in the Date column and “VR” and the page number in the PR column of each account. • Insert the ledger account number in the register’s PR column.