Purchase and Payment Cycle

Question 1

Cycle

Answer 1

1. Place an order (Requisition Department)
2. Place an order (Purchasing Department)
3. Receiving of goods (Receiving Department)
4. Recording( Accounting Department)

Question 2

1. Place an order (Requisition Department)

Answer 2

1. A request from a department to purchase an item should be made
2. Division member/ Storeman:
   - Purchase Requisition= Details= (amount, description of items needed, date)
   - Date
   - Signature
   - Pre-number, Pre-printed document
3. Division head/ Head Storemen (Auth)
   - Independent Review and Authorise work
   - Signature
4. Record
   Purchasing department
   Requisition department

Question 3

2. Place an order (Purchasing Department)

Answer 3

1. Purchasing clerk
   - Purchase Order= Details= (amount, description of items needed, date)
   - Date
   - Signature
   - Pre-number, Pre-printed document
   - Approved Quantity and Price (Supplier list, Requisition order)
2. Purchase manager(Auth)
   - Independent Review and Authorise work
   - Signature
3. Record
   - Supplier
   - Accounting department
   - Warehouse
   - Receiving Division
   - Purchasing Department (self)

Question 4

3. Receiving of goods (Receiving Department)

Answer 4

1. Purchasing & receiving [separate departments]
2. Clearly demarcated, physical access controls
3. Receiving Clerk (Two people receive goods)
   Check goods: quantity, description and condition (quality ) QQD
   Create goods received note
4. Receiving Manager
   Compare with purchase order and supplier delivery note
5. Sign the supplier’s delivery notes and note any differences
6. Record
   - Purchasing/ Procurement division
   - Supplier
   - Payment and Accounting division
   - Inventory Records
   - Receiving department

Question 5

4. Recording( Accounting Department)

Answer 5

1. Accounts payable clerk:
   - Compare invoice, purchase order & goods received note (quantities, quality, description).
   - Check prices from approved price list.
   - Check calculations, discounts, returns.
   - Sign/initial as performing above
   - Post details of purchases journal to creditors’ ledger and general ledger
2. Senior accounts payable clerk:
   - Independent Review and Authorise work
   - Signature
3. MONITORING (RECONCILIATIONS):
   Independent review: Two Accountants Check…
   - monthly statements/ invoices and creditors ledger
   - creditors reconciliations (creditors control vs. creditors ledger & creditors listing)

Question 6

Private Sector

Answer 6

Shareholders: funds and objective Profit maximisation

1. Transactions: Decision & approval
   
   • Need?
   • Purchase Requisition
   • Order form

Question 7

Public Sector

Answer 7

Public funds: No Profit objective

1. Transactions: Decision & approval
   - Need?- Procurement?
   - Purchase Requisition
   - Tender
   - Order form

Procurement:
- Section 1 of the PFMA (Public Finance Management Act) defines **fruitless and wasteful expenditure as expenditure which has been made in vain and would have been avoided had reasonable care been exercised.
- Vain -without value or substance
- Reasonable care – apply due diligence ( caution , care full application)
- Applicable to all departments, constitutional entities and public-entities listed in Schedule 2 and 3 of PFMA.
- Accounting officer has responsibilities to discover, report ,investigate and remediate any fruitless and wasteful expenditure

Guidelines for all procurement activities:
1. Value for Money
2. Open and effective Communication
3. Ethics and Fair Dealings
4. Accountability and reporting
5. Equity