ACQUISITION AND PAYMENT CYCLE (DISBURSEMENT ACCOUNTING SYSTEM)

ANSWER KEY:

11. A. cash disbursement journal is a record kept by internal accountants of all financial
expenditures made by a company before they are posted to the general ledger. Cash
disbursement journals serve a number of functions, such as a source for recording tax write-offs
and the categorization of other expenses.

12. B. The economic order quantity is the optimum quantity of goods to be purchased at one
time in order to minimize the annual total costs of ordering and carrying or holding items in
inventory. EOQ is also referred to as the optimum lot size.

13. A. RFID tags are a type of tracking system that uses smart barcodes in order to identify items. RFID is
short for “radio frequency identification,” and as such, RFID tags utilize radio frequency technology. RFID
seems like the clear choice. It can scan multiple items at once, whereas barcoding requires a person to
physically scan each item individually. But if RFID is truly more efficient, why hasn’t it replaced barcoding
entirely? Like all technologies, RFID has its limitations – and so does barcoding.

14. C. The Approver Category authorized to approve, release, and confirm payee accounts
respectively. For a given payee account each group must be different. The approver and releaser
have roles in approving bank accounts. The approver, confirmer, and releaser all have roles in
processing payment request exceptions.

15. A. The first step in the expenditure cycle is to order materials, supplies and services for the
company. Different individuals or departments in the company track their consumables and
create a purchase requisition when they're low on goods. A purchasing department employee
will approve the request, choose a suitable supplier and create a purchase order. Most
companies require purchasing agents to buy from an approved list of vendors and require
supervisor authorization for purchases. The extra steps take time and resources, but they ensure
that the company is ordering good, quality products at fair prices and limiting unnecessary
spending.

16. C. The last step in the expenditure cycle is to disburse cash. To prevent the possibility of
theft, companies generally have a different department or a different employee disbursing cash
for vendor invoices. Regardless of who is disbursing the cash, they have a significant responsibility
to study and mark off the supporting documentation for the payment. The cash disburser
generally makes a physical mark on the paper to "cancel" the documentation; this helps the
business keep track of who's been paid and prevents employees from accidentally duplicating a
payment using the same supporting documents.

17. B. Cash disbursements, also called cash payments, in accounting refer to payments made
by a company during a specified period, such as quarter or year. It includes payments made by
cash, but also by cash equivalents like checks or electronic fund transfers. Each entry on the cash
disbursements page should include the date, amount, payment method and purpose of the
transaction.

18. D. Every small business needs a cash disbursement system that efficiently and securely
handles a company's cash payments. Accounts payable, or A/P, is closely tied to cash
disbursements, and most transactions are processed through A/P when a cash payment is made.

19. D. Regularly, sometimes daily, the line items in the cash disbursement journal are used to
update the subsidiary ledgers- those designed to record specific types of accounting transactions.
If most cash payments are to suppliers for credit purchases, then the subsidiary ledger updated
is the accounts payable ledger.

20. C. The company's accounts payable department will approve vendor invoices after the
company receives the goods. Accounting employees match the vendor invoice, receiving report
and the original order form to ensure they've received all the goods they requested in working
order. Since they have an obligation to make a payment after they've received goods, some
businesses don't even wait for the invoice to make a payment. To simplify the process, these
businesses automatically generate invoices for their vendors after they're received all the
inventory on the receiving report.