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Purchases and Payment Cycle - Coggle Diagram
Purchases and Payment Cycle
Documents in the cycle:
Requisitions
List of approved suppliers
Supplier price lists
Purchase orders
Purchases cycle:
Functions:
Ordering
Receiving
Recording
Control objectives:
Occurrence/Validity:
Authorisation:
Completeness:
Accuracy:
Recording:
Classification:
Cut off:
Internal Control:
Supporting documents essential: Requisitions, PO, GRN, DN, invoice and statement
Requisitions are made out at re-order level, orders are authorised according to company policy
Goods received are inspected by 2 people, GRN matched to DN and invoices before recorded in PJ, register kept of unmatched invoices and and all docs are recoreded numerically.
Invoices checked individually for mathematical accuracy before recording it in PJ.
PJ is updated from invoice. From PJ to creditor's account in creditor's ledger and purchase and creditor's control account in general ledger
Inter-group purchases are distinguished by a code number.
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Payments cycle:
Functions:
Payments to creditors / payables
Control objectives
:
Internal control:
Supporting docs which must be present: payment requisitions, creditor statements, creditor reconciliations, PO, GRN, DN and invoices.
Requisitions are authorised by senior officials and supporting docs cancelled.
Creditor accounts are regularly reconciled with creditor's ledgers and payment advices recorded numerically
Supplier reconciliations performed and calculations reviewed by independent person
Payments are posted to individual creditor's account and totals are posted to creditor's control account.
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Occurrence/Validity:
Authorisation:
Completeness:
Accuracy:
Recording:
Classification:
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Weakness and recommendation:
Weaknesses are a lack of internal controls and this may lead to risks
For example: If requisitions for payments are not required by compony policy, or requisitions are not authorised by the correct person, as per company policy, unauthorised payments may occur.
