This section describes the acquisition/payment business process of an accounting information system. It illustrates many acquisition/payment process components for the firm. We will only focus on the merchandising activities of the firm. The acquisition/payment process (also referred to as the acquisition process, procurement process, or purchase process) includes activities related to purchasing
goods or services. Although acquiring employee labor is a type of acquisition, these activities are usually viewed as part of the human resources process because the data captured for the acquisition and payment of employee labor is very different from data collected for other acquisitions. In manufacturing and merchandising firms, the main focus of the acquisition/ payment process is ordering, receiving, and paying for inventory-raw materials and indirect materials for manufacturers
and merchandise inventory for merchandisers; since materials acquisition is not a major concern for many service firms, its acquisition/payment process may be less important than it is for manufacturing and merchandising firms. All businesses, including service firms, acquire goods and services through their acquisition/payment processes to support all business activities. The acquisition/payment process is for organizations with separate departments. Smaller firms may only formalize parts of this process. The acquisition/ payment process begins when a need arises to acquire goods or services. These requests may be for anything from raw materials for manufacturing to supplies for the human resources department. When this process is formalized, a purchase requisition is created either electronically or in hard copy. Sometimes, purchase requisitions are automatically generated by the enterprise’s information system. In some manufacturing systems, purchase/requisitions are automatically generated by the computer when materials inventory falls below a predetermined reorder point. For example, in a materials requirement planning (MRP) system, the computer can use the master schedule to generate timely materials requisitions without human intervention. In a just-in-time (JIT) production control system, materials requisitions are generated frequently-often daily or weekly. Regardless of how it is generated, a materials requisition is sent to the purchasing department. Once approved, the purchasing department uses the purchase requisition information to prepare a purchase order. Many automated MRP and JIT systems generate purchase orders directly. To cope with unpredictable demand, purchasers often use daily sales reports, inventory reports, market research, and intuitions to make inventory purchase decisions.The purchasing department sends purchase order information to a vendor. Vendors send back a formal approval of the purchase order. Purchase order information is then sent to the receiving department. Quantity information is often omitted to ensure that materials handlers accurately count the goods received. When shipments of ordered goods arrive, the receiving department completes a receiving report. Various controls are used to help the accounting department ensure that goods received are the goods ordered and that payments to vendors are only for goods received. The accounting department prepares payment authorization (a check is a paper payment authorization) and supporting information (such as the purchase order, receiving report, and vendor invoice) for goods received. This information is forwarded to the treasurer for payment. The treasurer makes the payment and clearly indicates on the supporting information that the goods received have been paid for. We will create the acquisition/payment business process for Pipefitters Supply Company