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Investment and Finance Business Cycle and EFT payments - Coggle Diagram
Investment and Finance Business Cycle and EFT payments
Finance and investment cycle centred on internal organisational controls
Investments in assets require proper authorisation + validity
EFT payments made to pay for investments in assets
EFT Controls
African Designs (Pty) Ltd: Used as a practical eg
Methods of raising funds for expansion or acquisition of assets
Issuing debentures / bonds
Raising loans from financial institutions or external funders
Issuing shares
Documentation
Minutes of shareholders/directors
Loan/lease contract
Journal voucher
Share certificate
Using retained income
Lease of assets
Share buybacks
Dividends
Legal and regulatory requirements for raising funding
Investment activities include: (a) Additions of fixed assets; (b) Disposal of Fixed assets; and (c) Repair and maintenance of fixed assets
Accounts affected in investment and finance cycle
Documents used in the cycle
Fixed Asset requisition with quote/negotiated prices
Capital budgets.
Minutes of Board of Directors
Fixed Asset register.
General Ledger accounts:
Authorisations for additions of fixed assets
Steps taken before assets acquired
formal written proposal by a Capex Committee
proposal must be supported by quotes and the required source of finance
proposal must then be presented to the Board of Directors
Repair and maintenance of assets
Disposal of fixed assets
Financing activities include raising funding from external sources
Internal controls and control objectives
Internal controls
Objectives that organisations want to achieve for every transaction
Weaknesses and recommendations
Risks
Control objectives
Authorisation
Internal controls
Purchases and sales of fixed assets: (a) Authorised by senior management on a numerical capital requisition/sales document;. and (b) Authorisation/decision recorded in minutes
All purchases and sales are authorised according to company’s policy
Occurence / Validity
All recorded assets are valid (really exist) and are supported by proper documentation
Internal control
Recorded assets are periodically compared to physical assets by an independent senior official.
All fixed asset purchases are supported by a fixed asset requisition and capital budgets (Supporting documentation)
Completeness
All valid fixed assets are recorded and nothing is omitted
Capital requisitions numerically accounted for
The list of missing numbers is regularly followed up
Fixed assets recorded in a fixed asset register and are regularly compared with fixed assets
Accuracy
All fixed assets are recorded at the correct amount and are arithmetically correct
Fixed assets are recorded at the amount of the invoice
Depreciation and other calculations are done by computer with a program which has been tested beforehand
Recording
All transactions i.r.o. fixed assets and depreciation are correctly recorded
All purchases and sales of fixed assets recorded in the fixed asset ledger accounts (control account) and fixed asset register from the source documents
The fixed asset register is reconciled with the control accounts in the ledger on a regular basis
Classification
All transactions i.r.o. fixed assets are correctly classified according to its nature
Fixed assets are classified into the respective categories according to company policy.
Improvements are capitalised as fixed assets and clearly distinguished from maintenance
Fixed assets are classified into the respective categories according to company policy
Cut off
All purchases and sales of fixed assets are recorded in the period to which it relates
Fixed assets purchased are recorded at the date of receipt (per GRN) and when sold as from the date that the risks and rewards of ownership passes to the purchaser in substance
General controls
Assets are properly safeguarded against theft and physical elements
Fixed assets stored in permanent form
Safe guard assets
Limiting access to authorised persons (locked, key control)