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PURCHASES AND PAYMENT CYCLES - Coggle Diagram
PURCHASES
AND PAYMENT CYCLES
UNIT 1: THE ORDERING OF GOODS
The documents presented within the ordering
goods function:
requisitions
list of approved suppliers
Supplier price list and
Purchase orders
Purchase orders should have the following information:
Sequentially numbered Po's are to be completed
The name of the supplier
the quantity ordered
A description of the goods
Discounts
Terms of payment
Delivery Address
Signature of the buyer / purchase department
There should be a purchasing department
that has a purchasing policy they follow and as well have a
list of approved suppliers that they use to purchase goods.
Before the order is sent to the supplier, it must first
be authorised by the purchase manager.
The purchase order must be issued in triplicate copies which is send to:
The Supplier
The receiving department
A copy must also be kept in a deliveries pending register
to match with the delivery note.
UNIT 2: RECEIVING OF GOODS
Documents presented within the receiving
of goods function:
Copy of the PO
Supplier delivery notes
Goods received notes
Receipt of goods:
On receipt of goods, person responsible
of receiving the goods should inspect the following:
Type
quality
Quantity
against the purchase orders before signing the DN
Details of goods received
Details of goods received should be captured on a GRN
The GRN should be signed off by the individual responsible for receiving
The GRN should have the following information:
The quantity of good received
The purchase order number
The date on which goods was received
A description of the goods
Details of the person who received the goods
The GRN should be issued in duplicate
format and copies send to:
ordering department
together with the copy of the PO and DN to
the accounts department
Treatment of damaged goods:
Damaged goods are not to be accepted
Must be returned to the supplier
The accounts and purchasing department must be notified accordingly
UNIT 3: RECORDING OF GOODS
Documents presented in the recording of goods function:
Supplier Invoice
Copy of the POs
Copy of the GRN
DN Form supplier
Purchases Journal and
Credit Notes
Invoice received:
Shouldn't be recorded until its approved as correct and checked.
The person should check the following:
Quality, type, quantity and date to the GRN and DN
The price, terms and account details to the agree PO
The calculations on the invoices
Recording purchase:
The purchases should be entered directly in purchase journal and filed under the suppliers name and checked to the statement received from the supplier
Disputed invoices:
A dispute invoices are to be kept separately and followed
up by a senior member of staff.
Goods Returned:
All goods returned must be sent back to the supplier
and a credit note is to be made out to the supplier
UNIT 4: PAYMENT CYCLE
Payments to creditors/payables consists of three functions:
Control over cheque forms
drawing & signing of cheques
recording of payments
Documents presented within payments function:
Remittance advices
Cheques
Bank Statements
Cash Payment Journal
Controls over cheque forms:
Cancel cheques should be clearly marked as cancelled and attached to the relevant cheque counterfoil.
All cheques should be sequentially numbered.
All paid cheques should be filed in a numerical order.
Cash cheques should be discouraged
All cheques must be crossed with the words 'not transferable'
Drawing and signing of cheques:
Cheques drawn should be presented to person authorized to sign and must be supported with the necessary supporting documents.
Documents to be paid must be inspected and if agreed that the expenditure was valid and accurate, the documents are to be marked as paid in order to prevent re-submission for payment.
Cheques should be signed by two signatories with the necessary level of authority to sign the cheques.
Recording of payments:
Recording of cheques must be done by persons who are independent of those who draw, sign or handle the cheques to ensure segregation of duties.
Cheques returned from bank must not be available to the person who keeps the account payable records.
The control account must not be accessible to the individuals responsible for maintenance of the accounts payable sub ledger.
Regular reconciliations are to be done by a person independent from those maintaining the sub ledger.
Individual creditors reconciliations must be produced on a monthly basis of all creditors balance.
EFT;s is also a valid payment Method.
UNIT 5: CONTROL OBJECTIVES AND INTERNAL CONTROL
Purchasing cycle
Occurrence/Validity:
All recorded purchases are valid and supported by proper documents.
Payment Cycle
All payments on creditors accounts are valid and are supported by proper documentation.
Purchasing Cycle:
Authorization: All purchases are authorized according to company policy.
Payment Cycle:
All payments are authorized according to company policy
Purchasing cycle:
Completeness: All valid purchase transactions are recorded and nothing is left out.
Payment Cycle:
All valid payment transactions are recorded and nothing is left out.
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.
Payment Cycle:
Payments are made at the correct amount and is arithmetically correct
Purchasing Cycle:
Recording: All purchase transactions are correctly recorded.
Payment Cycle
All payment transactions are correctly recorded
Purchasing Cycle:
Classification: All purchase transactions are correctly classified according to the nature thereof.
Payment Cycle:
All payments classified to the correct creditors account
Purchasing cycle:
Cut off: All purchase transactions are recorded in the correct reporting period.
Payment Cycle:
All payments recorded at date of payment per payment advice and date of cheque.