Question

ast year the Diamond Manufacturing Company purchased over $10 million worth of office equipment under its “special ordering” system, with individual orders ranging from $5,000 to $30,000. Special orders are for low-volume items that have been included in a department manager’s budget. The budget, which limits the types and dollar amounts of office equipment a department head can requisition, is approved at the beginning of the year by the board of directors. The special ordering system functions as follows.

Purchasing: A purchase requisition form is prepared and sent to the purchasing department. Upon receiving a purchase requisition, one of the five purchasing agents (buyers) verifies that the requester is indeed a department head. The buyer next selects the appropriate supplier by searching the various catalogs on file. The buyer then phones the supplier, requests a price quote, and places a verbal order. A prenumbered purchase order is processed, with the original sent to the supplier and copies to the department head, receiving, and accounts payable. One copy is also filed in the open requisition file. When the receiving department verbally informs the buyer that the item has been received, the purchase order is transferred from the open to the filled file. Once a month, the buyer reviews the unfilled file to follow up on open orders. Receiving The receiving department gets a copy of each purchase order. When equipment is received, that copy of the purchase order is stamped with the date, and, if applicable, any differences between the quantity ordered and the quantity received are noted in red ink. The receiving clerk then forwards the stamped purchase order and equipment to the requisitioning department head and verbally notifies the purchasing department that the goods were received.

Accounts Payable: Upon receipt of a purchase order, the accounts payable clerk files it in the open purchase order file. When a vendor invoice is received, it is matched with the applicable purchase order, and a payable is created by debiting the requisitioning department’s equipment account. Unpaid invoices are filed by due date. On the due date, a check is prepared and forwarded to the treasurer for signature. The invoice and purchase order are then filed by purchase order number in the paid-invoice file.

Treasurer: Checks received daily from the accounts payable department are sorted into two groups: those over and those under $10,000. Checks for less than $10,000 are machine signed. The cashier maintains the check signature machine’s key and signature plate and monitors its use. Both the cashier and the treasurer sign all checks over $10,000.

REQUIRED

Draw Flowchart.

Answer 1

The flow is are as under:

Purchase	Define Budget for the Purchase by BOD
	The requester made a requisition request the same need to approve by their department Head, then send to Purchase Department
	After Checking request the buyer select supplier from catalogue and ask for Price Quote
	After this PO is processed and original copy send to supplier with duplicate to department head, receiving, and accounts payable
	Upon receiving the goods the receiving department informs to Purchase Department, thereafter PO is transferred from Open to Fill file
	The Copy of PO is send to the Receiving Department, then copy is stamped with receipt date (Red ink Mark if any deviation from order Quantity)
	Then Receiving Department sent stamped PO and purchase items to the requisitioning department head

Payable	on receipt of a purchase order, the accounts payable clerk files it in the open purchase order file
	Vendor Invoice is t is matched with the applicable purchase order, and a payable is created
	On Due date Check is prepared and forwarded to the treasurer for signature

Treasury	Checks received daily from the accounts payable department
	sorted into two groups
	Checks for less than $10,000 are machine signed
	Both the cashier and the treasurer sign all checks over $10,000.