Chapter 6

Question 2

What are the requirements of an effective accounting system in regards to recording of transactions?

Answer 2

• transactions are entered completely
• entered solely for business
• accurately (at right value)
• in the right period
• in the right account

Question 3

What are the five stages of a purchase system?

Answer 3

• Placing the order
• Receiving the goods
• Receiving the invoice
• Recording the transactions in the PDB and accounts
• paying the invoice

Question 4

Five stages of sales system

Answer 4

• receiving sales order
• despatching goods
• raising invoice
• recording transactions
• receiving payments

Question 5

Sales system control risks

Answer 5

• giving credit to uncreditworthy businesses
• failure to record sales orders
• goods issued without invoicing
• duplication of invoices
• invoices with incorrect information
• incorrect VAT on invoices
• incorrect accounting entries for sales and credit notes
• incorrect accounting period cut-off