North Point Ltd manufactures and sells compact discs. The raw material used for the discs is purchased from Compact Disk Pty Ltd. The company has a computerised system but it is not net-worked and each department has its own stand-alone computer system. An order for the purchase material is raised by the stores department by completing two copies purchase requisition (PR). The top copy of PR is sent to purchasing department. When Goods Received Report (GRR) is received by the stores department, the PR is reconciled with the second copy and it is sent to the accounts department after updating the inventory records.
Purchasing Department approves the purchase requisition and prepares three copies of purchase order (PO). The top copy of PO is sent to the supplier, second copy to the Accounts Payable and third copy to Receiving Department.
Receiving Department reconciles the goods received with the PO and prepares two copies of GRR. The top copy is forwarded to stores department, second copy to the Accounts Payable.
Accounts Payable Department reconciles and checks for accuracy of the PR, PO, GRR and supplier’s invoice and forwards them to the group accountant with a cheque requisition form attached for the payment to the suppliers after updating the accounts payable records to indicate that the accounts have been settled.