14. Financial systems and procedures Flashcards
What are the advantages of using formal systems? (5)
- All transactions are recorded in the same way
- Staff can refer to written procedures if unsure what to do
- New staff can be trained quickly
- Auditors can follow transactions easily
- Errors are easily identifiable
What must be considered when designing a system? (4)
- Objectives
- Outputs
- Inputs
- Potential errors
Stages of the purchasing system (6)
- Requisition
- Ordering
- Goods receives
- Invoice received
- Invoice recorded
- Payment made
Stages of the sales system (6)
- Order received
- Order processed
- Goods dispatched
- Invoicing
- Recorded in accounts
- Payment received
What does it mean to say that businesses trade in credit?
How is credit approved?
Most businesses buy and sell in credit, meaning that they pay for good purchased and receive payment for goods sold some time after the goods/services have been delivered.
This means that companies should only give credit to those they believe able to later pay. This usually requires an application form, with some sort of reference from a bank or existing supplier.
What are the stages of the payroll system? (6)
- Hours worked recorded
- Overtime recorded
- Pay rates obtained
- Pay calculated
- Deductions calculated
- Net pay paid to employee
What are the three subdivisions of the cash system?
- Receipts
- Payments
- Petty cash
The inventory system (5)
- Purchase of raw materials
- Raw materials
- Work in progress
- Finished goods
- Inventory sold
Control within an organisation has several purposes (4)
- Safeguard company assets
- Efficiency
- Prevent fraud
- Prevent error
What is the difference between small and large companies when purchasing automated systems?
Large companies will have accounting software especially written for their needs, known as bespoke systems.
Smaller companies will purchase a standardised accounting package that has been written to suit any company, known as an off-the-shelf package.
Automated systems have what features? (4)
- Uniform processing of transactions
- Lack of segregation of functions
- Potential for data to be corrupted easily
- Potential for increased management supervision
