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Unit 2 Purchases and Payments Cycle, PURCHASES CYCLE: Control Objectives /…
Unit 2 Purchases and Payments Cycle
FUNCTIONS
ordering function
receiving function
recording function
Scenario: orders goods only when out of stock
Weakness
no purchasing policy with regard to re-ordering levels
Recommendations
have a purchasing policy where stock is re-ordered when it reaches a certain level and not when it's out of stock
risk
clients will not get their orders in time as goods are out of stock before ordering
DOCUMENTS
receiving function
copy of purchase order
supplier delivery note
goods received note
recording function
copy of purchase orders
copy of GRN
delivery note from supplier
supplier invoice
purchases journal
credit notes
ordering function
list of approved suppliers
supplier price lists
requisitions
purchase orders
Recording
posted to creditors ledger and general ledger
creditors control account reconciled with creditors list
Cut Off
recorded at date of receipt
Occurrence/Validity
Supporting Documents
Completeness
GRN matched with DN
unmatched invoice register
requisitions, PO, GRN numerical
Accuracy
invoice checked against PO and price list
purchase journal recorded from invoices
Classification
intergroup purchases have code number and seperate record
Authorisation
purchasing department / buyer
authorised by purchase manager
Completeness
creditors control account reconciled with creditors ledger
payment advices numerically recorded
Occurrence/Validity
Creditor's payments Supporting documents
Cut off
payments posted correct period
Recording
payments posted to creditors account and creditors control account
Authorisation
cheque requisition authorised by senior official
two signatories
Accuracy
creditors recon serve as supporting documents
calculations reviewed by independent person
Classification
payments coded to creditors number
PURCHASES CYCLE: Control Objectives / Internal Controls
PAYMENT CYCLE: Control Objectives / Internal Controls