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Purchases and Payments Cycle - Coggle Diagram
Purchases and Payments Cycle
The ordering function
List of approved suppliers
Supplier price lists
Requistions
Purchase orders
Documentation of ordering function:
Activities of the ordering function: 1.A separate purchasing department or buyer must be employed by the company 2.Sequentially numbered purchase orders are to be completed
Receiving functions
Supplier Delivery notes
Good received note
Copy of the Purchase order
Activities of the receiving function: 1.Inspect
the goods for type, quality and quantity against the purchase orders 2.Details of goods received should be captured on a GRN
Documentation of receiving function
Recording function
Supplier invoice
Copy of Purchase Order
Documentation of receiving function
Delivery Note from supplier
Purchases Journal
Copy of Goods Received Note
Activities of recording function: 1. Disputed invoices are to be kept separately and followed up by a senior member of
staff 2.All goods returned must be sent back to the supplier and a credit note is to be made
out to the supplier
Creditors and Payables function
Bank statement
Cash payments journal
Cheques
Activities in the Creditors and payable function: 1.All paid cheques should be filed in a numerical order 2.Cheques should be signed by two signatories with the necessary level of authority
to sign the cheques
Remmitance advices
Internal controls, control objectives and test of controls in the
purchasing cycle
Accuracy: All orders are carried out accurately. All purchase transactions are accurately
recorded at the correct quantity, at the correct amount and are arithmetically correct
Test of control :Re-perform the mathematical accuracy of the
invoice.
Recording: All purchase transactions are correctly recorded
Select a sample of the creditor's reconciliation and inspect whether the supporting documents and records
Test of control:
Classification: All purchase transactions are correctly classified according to the nature
thereof
Test of control:Select a sample of purchases and inspect
whether it has been correctly classified.
Completeness: All valid purchase transactions are recorded and nothing is left out
Authorisation: All purchases are authorised according to company policy
Test of control :Select a sample of purchase orders and
inspect for the signature of the buyer
Validity: All recorded purchases are valid and supported by proper documentation
Test of control : Select a sample of purchases from the purchase journal and check if they are supported by the proper supporting documentation (PO's,GRN)
Cut off: All purchase transactions are recorded in the correct reporting period
Obligations – trade payables represent obligations pertaining to the company
Completeness – all trade payables and accruals which should have been recorded
have been recorded all relevant disclosures that should have been recorded have
been recorded
Accuracy, Valuation and Allocation – trade payables are included in the financial
statements at appropriate amounts and related disclosures have been appropriately
measured and described
Existence – trade payables in the balance actually exists and is not fictitious