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What Is Procurement? Discuss Its Connection With Other Business Functions, Especially Accounting

Procurement is the process of acquiring goods and services. It involves selecting suppliers, negotiating terms, and settling payments. Procurement works closely with accounting to ensure goods are obtained within budget and for optimal profit. A manual procurement cycle relies on paperwork and is prone to errors, while an ERP system automates the process, reducing paperwork and improving accuracy. However, ERP systems have high maintenance costs and make employees reliant on technology. A purchase requisition is an internal document requesting goods. A purchase order is a contract sent to suppliers detailing items, quantities, and prices ordered. Goods receipt updates inventory levels upon receipt of items. Returns and invoices then adjust levels and payments.

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Thian Patrice Evia
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50 views2 pages

What Is Procurement? Discuss Its Connection With Other Business Functions, Especially Accounting

Procurement is the process of acquiring goods and services. It involves selecting suppliers, negotiating terms, and settling payments. Procurement works closely with accounting to ensure goods are obtained within budget and for optimal profit. A manual procurement cycle relies on paperwork and is prone to errors, while an ERP system automates the process, reducing paperwork and improving accuracy. However, ERP systems have high maintenance costs and make employees reliant on technology. A purchase requisition is an internal document requesting goods. A purchase order is a contract sent to suppliers detailing items, quantities, and prices ordered. Goods receipt updates inventory levels upon receipt of items. Returns and invoices then adjust levels and payments.

Uploaded by

Thian Patrice Evia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1. What is procurement?

Discuss its connection with other business functions, especially


accounting.

Procurement is the action of obtaining or acquiring equipment and goods. It is the process
of selecting suppliers, negotiation and settlement of the payment terms. Procurement is
connected with businesses because it helps the company to have a contract with different vendors
and manufacturers; make sure that those quality products are being sent to the business. They act
as the link for the bulk buyers and their provider. Procurement has a strong bond with accounting
because accounting’s concern is about budgeting or proper usage of the company’s money and
earn at the same time while procurement is spending the money wisely on worth it goods and
services for the profit that the business is aiming.

2. What could be the difference between a manual procurement cycle and one done
through an ERP? Discuss. Site some advantages and disadvantages.

Manual Procurement Cycle is paper based which give rise to bunch of paperwork and
workload. It also requires plenty of backups and extra copies just in case some papers went
missing, since it is also manual; errors are very common while cycle done through ERP are more
advance and technological which can speed up the process and it is more precise than manual.

 Manual

Advantage:
- Employees are independent and still can work even without the help of technology
- Not expensive since the business doesn’t need to purchase the software
Disadvantage:
- Error is very common
- Transaction disagreements due to delays or not accounted discounts

 ERP
Advantage:
- Makes the process more accurate
- Shorten the cycle and less paperwork
Disadvantage:
- Expensive in maintaining the software
- Employees became dependent to it and doesn’t bother double checking the
transactions
3. What is a Purchase Requisition? Discuss.

Purchase requisition is a document used internally, it is like a request made by the


employee to obtain or make purchase of goods. This document informs the purchasing manager
or officer so they can start the process of purchasing the said requested item or even service. This
document is also used by the finance and accounting department for the correlated cost of the
purchase.

4. What is a Purchase Order? How does it affect inventory levels?

Purchase order is a document that is commonly used by a buyer stating the type of good,
how many will he order and the price of the item then he will send it to the seller, and the seller
then will deliver the specific goods being ordered. It is like the contract of sale. Purchase order
affects inventory level because when the goods are received, the quantity of the stock goods will
change as well, it may increase or decrease depending on the said order.

5. What is a Goods Receipt PO? How does it affect inventory levels?

Goods Receipt PO is a document business made when they receive the goods from the
suppliers. It is also the physical movement of the stocked supplies stored in the warehouse.
Goods receipt PO affects the inventory level because every time there’s a receipt, it updates the
quantities which results to an increase of the stored goods in the warehouse.

6. Explain the nature of Goods Return.

Goods return is a process when the business wants to return the previously purchased
goods back to the supplier; the goods may be defective or wrong item, after returning it, the
business will receive a refund of the exact amount they paid in acquiring those supplies. Goods
should always be monitored because too much purchase or returns may affect the profitability of
the company.

7. What is an A/P Invoice? Discuss.

Accounts payable invoice is a process handled by the AP Department; it is a detailed


document that contains the payment terms, due date, goods or services included, and other
important terms. It is sent by the suppliers to their customers to inform them about the payment
that is due regarding a specific purchase of goods. This is important since it is in charge of the
company’s bills and payments excluded from the payroll.

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