Chapter 9: Procedures for Purchasing
Purchasing involves buying things. A business buys three types of items:
Raw materials: For use in production
Goods: For use within the business and finished goods for resale
Services: cleaning, electricity or expert advice
Purchase Requisition Form
-An organisation identifies the need to purchase materials, goods or services, a purchase
requisition form must be completed.
-A purchase requisition is a document that tells the purchasing department or manager
exactly what items and services are required, their quantities, sources, and costs involved.
-Purchase requisitions for goods and services may be initiated throughout an
organisation.
-The person initiating the purchase should retain a copy of the requisition for their
records.
-Purchase order is a document sent to the supplier, formally ordering the goods or service.
-Goods received note is completed to confirm what has been received.
-A bin card is a manual record updated when inventory is received or issued.
-A materials requisition note is a request from the production function to the warehouse
for the materials listed.
-A materials returned note records the return of materials to raw materials inventory
-A perpetual inventory system updates inventory records every time inventory is received
or issued from stores
-Store ledger accounts record inventory quantities, cost, and carrying value.
-Free inventory is inventory that is available for requisition.
-Three inventory categories are raw materials, work-in-progress, and finished goods.
-Direct materials are transferred directly to work-in-progress accounts when issued,
whereas indirect materials are accounted for in production overheads.
