Question

In: Accounting

Describe (120–150 words) the typical inputs for a purchasing sub-system, payroll sub-system and cash sub-system. Thank...

Describe (120–150 words) the typical inputs for a purchasing sub-system, payroll sub-system and cash sub-system.

Thank you

Solutions

Expert Solution

1. Purchase subsystem

Purchase subsystem is the system which ensures procurement of materials/ goods as per requirements of various departments of the organistion. This process starts with

  1. Requisition of materials/ goods from concerned section.
  2. Purchase subsystem requires to obtain quotation from approved vendors/ suppliers for this procurement.
  3. Once vendor is finalised, purchase sub system requires to issue an order to approved vendor.
  4. Materials/ goods will be supplied by vendor.
  5. Vendor will issue invoice in the name of the company for payment.
  6. Purchase subsystem may return defective materials/ goods, if any, to vendor
  7. Vendors/ suppliers will get satisfied that goods/ materials are in-deed defective and accordingly vendor will issue credit note

Hence, inputs required for the purchase subsystem are:

a. Orders sent to vendors/ suppliers by the Company

b. Invoices received from Vendors/ suppliers

c. Credit Notes received from Vendors/ suppliers

2. Payroll subsystem

Payroll subsystem process salary payments to be made to employee on monthly basis. Payroll subsystem is responsible for processing of payroll to all eligible employees and make payment to employees accordingly.

Hence, inputs required for the payroll subsystem are:

a. Employee details such as employee code, grade/ designation, date of birth, date of joining organisation, various components of salary such as basic pay, various allowances, value of perquisites, various deduction to be made from salary such as provident fund, professional tax, tax on income from salary, net amount payable to employee for the month

b. Attendance records and time sheets based on which salary payable that would be calculated on pro-rata basis, as applicable

3. Cash subsystem

Cash subsystem records all transactions related to cash i.e. cash receipts received and cash payments processed in the organisation. Movement of all cash transactions within the organisation is tracked by Cash subsystem.

Hence, inputs required for the Cash subsystem are:

a. Receipts issued for amount received in the organisation

b. Direct credits made by customers in bank accounts of the organisation

c. Cheques issued for the purpose of payment to vendors/ suppliers/ payee

d. Payments made by using any other mode i.e. payment through credit card, direct debits in bank accounts based on standing instructions sent to banks, any other periodic payments


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