Chapter 13 The Accounts Payable/

Cash Disbursement (AP/CD) Process

Accounting Information Systems 8eUlric J. Gelinas and Richard Dull

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Learning Objectives

• Describe the relationship between the AP/CD process and its business environment.

• Summarize how various technologies, including e-invoicing and e-payments, can improve the effectiveness of the AP/CD process.

• Depict the logical and physical characteristics of a typical AP/CD process.

• Prepare a control matrix for a typical AP/CD process including an explanation of how business process control plans can accomplish operations and information process control goals.

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Process Definitions and Functions

• The accounts payable/cash disbursements (AP/CD) process is an interacting structure of people, equipment, methods, and controls that is designed to accomplish the following primary functions:

1. Handle the repetitive work routines of the accounts payable department and the cashier.

2. Support the decision needs of those who manage the accounts payable department and cashier.

3. Assist in the preparation of internal and external reports.

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AP/CD Horizontal Perspective

1. Invoice received from vendor.

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AP/CD Horizontal Perspective

2. Invoice notice sent to general ledger.

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AP/CD Horizontal Perspective

3.

Approved voucher (payment request) sent to cashier (3a) and to general ledger (3b).

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AP/CD Horizontal Perspective

4.

Payment (e.g., check) sent to vendor by cashier (4a), paid voucher (payment notice) returned to the accounts payable department (4b), payment notice to the general ledger (4c).

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AP/CD Vertical Perspective

The AP/CD Process - Level 0 Diagram

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AP/CD Process - Diagram 1: Validate Invoice

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A Sample Purchase Order Screen

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AP/CD Process - Diagram 2: Cash Disbursements

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Processing Non-Invoiced Disbursements

• In some cases disbursements are not invoiced, e.g., freight bills, rent, payroll.

• The handling of non-invoiced disbursements depends on whether or not a voucher system is used.

• A voucher system prepares a voucher for every expenditure from payroll to purchases of raw materials.

Processing Non-invoiced

Disbursements

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Logical Data Descriptions for the AP/CD Process

• Accounts payable master data. This data store is a repository of all unpaid vendor invoices.

– The data design should consider how the data will be processed when the cash manager is deciding what payments to make.

– The manager may want to merge vendor invoices so that the total amount due each vendor can be accumulated.

– Alternatively, the manager might want to select specific invoices for payment.

• Cash disbursements data. The purpose of this data is to show, in chronological sequence, the details of each cash payment made.

– Each record in this data normally shows the date the payment is recorded, vendor identification, disbursement voucher number (if a voucher process is used), vendor invoice number and gross invoice amount, cash discount taken on each invoice, net invoice amount, check amount, and check number.

Entity-Relationship

(E-R) Diagram

(Partial) for the AP/CD Process

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AP/CD Process Relational Tables

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AP/CD Process Relational Tables(continued)

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Technology Trends and Developments

• E-invoicing - the processing of invoices in electronic form – Scan documents– Use purchasing cards (p-cards)

– Invoices can be submitted electronically

• E-payments - the electronic submission of payments– EDI and XML-based technologies – Settled through the ACH network, wire transfer

or credit card

AP/CD Process: Systems Flowchart

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Purchase Returns and Allowances• Sometimes defective goods are returned or an

allowance is made for non-conforming items.

• This exception routine usually begins at the point of inspecting and counting the goods or at the point of validating vendor invoices.

• Purchaser transmits a debit memo to the vendor requesting the account adjustment.

• Vendor responds with a credit memo indicating the authorized account adjustment.

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AP/CD Fraud

• AP fraud usually involve fictitious vendors and false invoices– A dishonest employee

with access to the vendor file authorizes fictitious payment

– May embezzle amounts refunded by vendors

– Human error is still a leading cause of loss

• CD fraud is less sophisticated – Usually involves check

fraud

– Takes many forms from stealing and passing stolen checks to changing amounts on legitimate checks or check forgery

– Easier and more common with computer duplication technology

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Exposure to Loss and Destruction of Resources

• Resource losses due to unintentional mistakes and inadvertent errors are as costly as, or more costly, than those caused by intentional acts of fraud.

• Examples include:

– Making payments for incorrect amounts

– Paying the wrong vendor

– Paying the same invoice twice

AP/CD Control Matrix

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