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Kim Smith.
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Noah098
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maam is it that we cannot use the below SP for existence of TPs?
Select a sample of trade payabels balances, agree it to its GRN and purchase order to
confirm existence.
Kim Smith
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Existence of assets/liabilities – you start with FS and work backwards:
FS -> TB -> Payables control a/c balance reconciled to list of individual balances -> make-up of individual balances -> purchase invoices -> GRNs.
The GRN confirms the liability to the supplier was incurred (existence) – there is no need to trace back further to purchase order/requisition (which don’t in any case confirm the liability). You can’t agree balances directly to GRNs (or GDNs) because balances are monetary amounts ($).
Noah098
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my bad! so stupid of me to never think about it, in the way you just explained!
Noah098
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but ma’am waittttt! we may not be able to trace total amount payable to a particular supplier to a single GRN, but we can surely trace multiple GRNs relating to goods purchased from that particular supplier and agree the payables balance with that supplier! so then in that case isnt it possible to trace existence using the procedure described here:
Noah098 wrote:maam is it that we cannot use the below SP for existence of TPs?
Kim Smith
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You wrote … “a sample of trade payabels balances ($$$$s), agree it to its GRN”
I am saying this is NOT POSSIBLE – for any of the following reasons:
(1) You cannot agree something that is $s to something that is not $s
(2) LOOK at Chapter 13 – note the main activities in the purchase system … only the invoice tells you how much the liability is – the payment amount will be the invoice amount
(3) THINK (assumed knowledge of FA) – how do you get a payables balance?
Dr Purchases
Cr Payable
The INVOICE amount as recorded in the purchase day book (a book of prime entry).
(4) GRNs are NOT recorded in a book of prime entry so cannot be “found”, “identified” directly from the payables account – only INDIRECTLY via the invoice that is recorded in the payables a/c
Noah098
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