Purchase ledger ??????????

Question

In the purchase ledger clerk role I have seen some job descriptions with the following duties:

Costing the suppliers invoices

Coding to cost centres

Processing BACS runs and cheque payments

Posting employee expenses

If someone could kindly explain these duties in a little detail I would be very grateful ( plus you'll get 10 points lol ). Sorry if this seems like a very basic question however I need to know.

Thanks

Answer 1

The first one is probably checking that they have charged the agreed/quoted price. Perhaps also checking that the calculations on the invoice are correct.

The second one is allocating the costs to the part of the organisation that ordered them.  The whole organisation will have been broken down into cost centres for this purpose, such as finance, payroll, sales office, etc. It will also serve the budgetary control system by providing for the comparison of budgeted costs against actual.

The third one is arranging for the payment of creditors via the Bank Automated Clearing System. The bank receives a schedule of creditors to be paid, and then arranges to transfer funds to each of the creditors, but making one total payment out of payers bank account. Also, some organisations prefer to be paid directly by cheque, rather than by the BACS system

With the fourth one. Some employees will incur expenses during the performance of their duties, such as salesmen, executives etc, dependent on the type of business. Car expenses, airflight, hotel etc. These will need to be recorded (posted) into the expenses a/c within the general ledger, and, as with purchase invoices, posted to a cost centre. Typically, the amounts due to the staff can be paid via petty cash, cheque, payroll.

Answer 2

In any business, there are 2 basic roles which records/manage the inflow or outflow of company's fund. Namely the accounts receivable (AR) and account payable (AP). Your role is responsible for recording the outflow funds, thus the accounts payable function.

AR & AP roles help in drawing up the the profit and loss report, which will then shows if the company is making a profit or loss.  Simplified report as follows:

Sales                               $x*x (AR role)

Less: Cost of Sales           $x*x (AP role)

                                        -------

Gross profit                       $x*x

Less: Expenses                $x*x (AP role)

                                       --------

Net Profit/(loss)                 $x*x

                                       --------

Costing of supplier invoices.

There are two type of suppliers:  

a) those that supply goods or service that company will process for sale or re-sell it in original state with profit. (e.g timber supplier for a furniture making factory, wholesaler who provide goods to a retailer) - This will record into the cost of sale.

b) those that supply goods or services that is use/consume solely by the company (e.g stationery supplies, telecommunication) - This will be recorded as expenses.

Coding to cost centres

This helps in analysing the profit and loss report. For example, a travel agent would like to know it's financial performance from selling airticket and hotel accomodation individual, it will code the cost centre by airticket, hotel accomodation. Or a retail chain will like to know it's financial performance by region will be most likely to code the cost centre by province/countries.

Processing BACS runs and cheque payments.

This will record that funds goes out of the company.  Usually, someone will monitor the company's bank account to ensure there's enough cash before this can be done. And of course, you will have to process such payment otherwise suppliers will start chasing you for overdue payments.

Posting employee expenses

This will records as the expenses in the profit and loss report.