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Hello ken,
I have a question regarding the purchasing system:
Question – Greystone, December 2010.Deficiency:
Once the purchase invoice has been matched to the GRN it is then sent to the purchasing director for authorisation. It is at this stage that the invoice is entered onto the purchase ledger.Implication:
The purchase ledger will not have all invoices posted, understating liabilities. Also payables may be paid late.Control recommended:
Invoices not matched should be filed separately, as should those not posted. These should be reviewed at period ends and accrued for to ensure completeness of payables.Purchase, inventory and trade payables should be recorded when goods are received from suppliers, right? So, if invoices are posted onto the general ledger late, how does it cause liabilities to be understated if the related liabilities have already been recorded at the time of receipt of goods?
Thank you in advance.
Liabilities are not normally recorded when goods are received. They are only recorded upon receipt of an invoice. At year end there has to be a special exercise to ensure cut-off is correct. For purchases received but no invoice received, a liability has to be estimated and set up:
Dr Purchases
Cr Purchase liability (not individual suppliers)If goods are in inventory they must also be in purchaees.
After year end, the journal can be reversed and invoices posted when received.
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