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Purchases and Payments Cycle - Coggle Diagram
Purchases and Payments Cycle
Purchasing cycle focuses on the controls that should be implemented by an organization to ensure the purchasing of the goods meet the relevant control objectives as implemented by management.
The payment cycle focusses on the payment transactions of an entity where it has to make payments for the purchase of goods and payments to creditors in its ordinary business activities.
Ordering of goods
List of approved suppliers
Supplier price lists
Requisitions
Purchase orders
Receiving of goods
Supplier delivery notes (DN)
Goods received notes (GRN)
Copy of the purchase order (PO)
Strict controls need to be implemented over the input; processing and final output of the above-mentioned documentation, as they will form the supporting documentation for the journal entries that need to be processed during the accounting process.
Recording of Goods
Copy of Goods received Notes
Delivery note from supplier
Copy of Purchase Orders
Purchase Journal
Supplier invoice
Credit Notes
Payments cycle
Payments to creditors/payables
Drawing and signing of cheques
Recording of payments
Control over cheque forms
After having taken delivery of goods, an entity has the obligation to pay the supplier for the goods
The obligation to pay has to be recorded concurrently with the acknowledgement of the reciept of goods
The control objectives for both the purchase and payment cycle are as follows
Accuracy
Recording
Completeness
Classification
Authorisation
Cut off
Occurrence/Validity