Common Accounting Forms: Function & Purpose

Instructor: Tammy Galloway

Tammy teaches business courses at the post-secondary and secondary level and has a master's of business administration in finance.

In this lesson, we'll discuss accounting forms to document the purchasing and selling process. You'll also learn about internal controls and state and federal tax on earnings.

The Purpose of Accounting Forms

Bailey's Bows started as a simple, local business but now has grown regionally. Bailey's hired two accounting staff to manage accounting functions. However, they need help in streamlining the processes and creating the appropriate accounting forms. Bailey, the owner, contacts Dawson and Lawson Certified Public Accountants (CPA) to help. The CPAs meet with Bailey and the accounting staff. They explain there are two purposes for accounting forms: to establish and maintain internal control and to document and prove all financial transactions. The importance of these forms are of particular interest to Bailey's Bows and to the state and federal government. Let's take a closer look at their discussion.

Purchase Requisition

In the past when Bailey's purchased material for the bows, they would simply go to the fabric shop, pick out their favorite colors, and keep the receipts in a drawer. Now with their enormous growth, the CPAs suggest they buy in bulk from a wholesaler. The first step in the process is to receive an approved purchase requisition. A purchase requisition is a document that lists the items, the costs, and the supplier information. Once approved by Bailey, the accounting department creates a purchase order.

Purchase Order

A purchase order is created after the purchase requisition and is sent to the supplier as a request for goods. The purchase order, also called a PO, includes Bailey's shipment address, what they ordered, the quantity, and the agreed-upon price. Upon receipt of the PO, the supplier ships the goods to Bailey's.

Receiving Report

Once Bailey's receives the goods, they create an internal report to confirm receipt, called the receiving report. The report should include the date the goods were received, the name of the person who signed for the shipment, and the goods' condition. The accountants told the group that they may also want to include the location of the warehouse on the report, just in case they decide to have more than one warehouse location.

Check Voucher

After Bailey's confirms the order is correct and in good condition, the supplier will send a request for payment. While Bailey is the owner, the CPAs state an accounting best practice requires more than one signature on the check to maintain internal controls. Internal controls are documented assurances of accuracy. Once the check is written, a check voucher is created that documents the disbursement of funds. Now let's move on to the sales documentation process.

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