Term
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Definition
| A commitment to purchase specified items at designated prices from a particular supplier for a set time period, often one year. |
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Term
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Definition
| A document used to record a reduction to the balance due to a vendor. |
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Term
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Definition
| A document that identifies the vendor, lists the outstanding invoices, and indicates the net amount to be paid after deducting any applicable discounts and allowances. |
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Term
| Economic Order Quantity (EOQ) |
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Definition
| The optimal order size so as to minimize the sum of ordering, carrying, and stockout costs. Ordering costs include all expenses associated with processing purchase transactions. Carrying costs are the costs associated with holding inventory. Stockout costs represent costs, such as lost sales or production delays, which result from inventory shortages. |
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Term
| Evaluated Receipts Settlement (ERS) |
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Definition
| An "invoiceless" approach to the accounts payable process. Replaces the traditional three way matching process (vendor invoice, receiving report, and purchase order) with a two way match of the purchase order and receiving report. Saves time and money by reducing the number of potential mismatches. Also saves suppliers the time and expense of generating and tracking invoices. |
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Term
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Definition
| A recurring set of business activities and related data processing operations associated with the purchase of and payment for goods and services. |
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Term
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Definition
| A cash account with two characteristics: (1) It is set at a fixes amount, such as $100, and (2) vouchers are required for every disbursement. At all times, the sum of cash plus vouchers should equal the preset fund balance. |
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Term
| Just-In-Time (JIT) Inventory System |
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Definition
| A system that minimizes or virtually eliminates manufacturing inventories by scheduling inventory deliveries at the precise times and locations needed. Instead of making infrequent bulk deliveries to a central receiving and storage facility, suppliers deliver materials in small lots at frequent intervals to the specific locations that require them. |
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Term
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Definition
| Gifts given by vendors to purchasing agents for the purpose of influencing their choice of suppliers. |
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Term
| Materials Requirements Planning (MRP) |
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Definition
| An approach to inventory management that seeks to reduce required inventory levels by improving the accuracy of forecasting techniques to better schedule purchases to satisfy production needs. |
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Term
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Definition
| A method for processing accounts payable in which each approved invoice is posted to individual vendor records in the accounts payable file and is then stored in an open invoice file. When a check is written to pay for an invoice, the invoice is removed from the open invoice file, marked paid, and stored in the paid invoice file. |
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Term
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Definition
| A corporate credit card that employees can use to purchase specific kinds of items. |
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Term
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Definition
| A document that formally requests a vendor to sell and deliver specified products at designated prices. It is also a promise to pay and becomes a contract once the vendor accepts it. |
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Term
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Definition
| A document or electronic form that identifies the requisitioner; specifies the delivery location and date needed; identifies the item numbers, descriptions, quantity, and price of each item requested; and may suggest a vendor. |
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Term
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Definition
| A document that records details about each delivery, including the date received, shipper, vendor, and purchase order number. |
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Term
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Definition
| The level to which the inventory balance of an item must fall before an order to replenish stock is initiated. |
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Term
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Definition
| The set of documents used to authorize payment to a vendor. It consists of a purchase order, receiving report, and vendor invoice. |
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Term
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Definition
| A method for processing accounts payable in which a disbursement voucher is prepared instead of posting invoices directly to vendor records in the accounts payable subsidiary ledger. The disbursement voucher identifies the vendor, lists the outstanding invoices, and indicates the net amount to be paid after deducting any applicable discounts and allowances. |
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