BKAS 2013 REVISION SET SUGGESTED SOLUTION

A. Indah Jaya Bhd.

N
o
1.

Weaknesses (i)

2.

Segregation of duties:
The accounting clerk
updates the accounts
payable
subsidiary
ledger and the general
ledger.

Segregate the two duties.

For example, the updating
of
accounts
payable
subsidiary ledger is done
by accounts payable clerk
and updating the general
ledger by general ledger
clerk

Lack of Supervision:
No supervision in place
in
the
receiving
department to ensure
that the receiving clerk
is accurately checking
the inventory that is
coming in.

The blind copy of the

purchase order should be
provided to the receiving
clerk to force the clerk to
count
the
inventory
received.

Lack
of
Transaction
authorization.
The purchasing clerk
reviews the inventory
records and chooses
which
suppliers
to
purchase the inventory
from.

Improvement suggestions
(ii)
The purchases of inventory
should be authorized by the
Inventory
Control
Department and not by the
purchasing clerk.

Incomplete records:
The blind copy of the
purchase order is not
provided to the receiving
clerk.
4.

Incomplete records:
No purchase requisition
document is prepared to
authorize the purchasing
department to reorder
inventory when it is
needed.

Purchase requisition must

be
prepared
by
the
Inventory
Control
Department to authorize
the Purchasing Department
to reorder inventory when it
is needed.

5.

Independent verification
The accounting clerk
uses the invoice to
update the accounts
payable
subsidiary
ledger and purchases
journal.
A
three-way
match is not performed.

The
accounting
clerk
should
reconcile
the
invoice, purchase order,
and receiving report before
recording a liability to
ensure that the company is
recording the appropriate
liability.

B. Sally Stationaries. Sales has issued a cheque for an invoice it has

received from Office Supplies Sdn. Bhd. The accounts payable clerk has
three documents: a receipted purchase order (Figure 2), a receiving
report (Figure 3), and an invoice (Figure 4). The clerk has prepared the
accompanying cheque and had it signed for an amount of RM2,180.00.
PURCHASE ORDER
No:
Sally Stationaries Sales
23 Sintok Road
06010 Sintok, Kedah
To:
Office Supplies Sdn Bhd.
Order date:
5th May 2013

Purchase
Requisition
No.

Description
A4 copy paper 80g
Printer cartridge Canon
LBP450
Electronic stapler
A4 paper files Pack of 50
Blinder A4 2 rings large

32223

Price (RM)
12.50
220.00

Quantity
10
5

Total
125.00
1,100.00

75.00
40.00
8.00

1
20
10
Total

75.00
800.00
80.00
2,180.00

Prepared by:

Approved by:
William
(Purchase Manager)

(Purchase Officer)
Figure 2. Purchase order

RECEIVING REPORT
No: 22323
Sally Stationaries Sales Warehouse
Goods received from:
Office Supplies Sdn Bhd.
Receipt date:
14th
May
2013

Purchase
Order No.

Description
A4 copy paper 70g
Printer cartridge Canon
LBP450
Electronic stapler
A4 paper files Pack of 50
Blinder A4 2 rings large

Price (RM)
12.50
220.00

Quantity
10
3

75.00
40.00
8.00

1
20
10

Prepared by:
RichardMark
Richard Mark
(Receiving Store Clerk)

PO12121

Comments
OK
Box
damaged,
item ok
OK
OK
OK

Received by:
RichardMark
Richard Mark
(Receiving Store Clerk)
Figure 3. Receiving report

INVOICE
No:
3211/06/20
13
Office Supplies Sdn Bhd.
345 Langgar Road,
Mergong, Alor Setar
04-540 0000
To:
Sally Stationaries Sales
23 Sintok Road
06010 Sintok, Kedah
(Attn: Mr. Sally Wood)

Account
Code:
SS100
Terms: 2/10, n/30

Invoice date:
30th
May
2013
Description
A4 copy paper 80g
Printer cartridge Canon
LBP450
Electronic stapler
A4 paper files Pack of 50

Invoice No.

32223/2013

Price (RM)
12.50
220.00

Quantity
10
5

Total
125.00
1,100.00

75.00
44.00

1
20
Total

75.00
880.00
2,180.00

Approved by:
Teddlie
(Account Manager)
Please quote your account code when
enquiring about invoice details

REMITTANCE ADVICE
Account Code: SS100
Due Date: 30th June 2013
Account Name: Sally Stationaries Sales
Invoice No: 32223/2013
Amount owing: RM2,260
Date received:
Received by:
Amount Received:

OFFICE USE ONLY

Date entered:
Entered by:
Cheque Number:
Figure 4. Invoice

REQUIRED:
a Explain how each of the documents above (i.e., purchase order,
receiving report, and invoice) plays an important role in the
authorization of payments to accounts payable.
The purchase order, receiving report and invoice play an essential role
in the authorization of payments. Each of these documents provides
evidence of the stages in the payment process preceding final
issuance of payment.
Purchase order to ensure that all orders are requested by
authorized requestor, no excessive inventory ordered and orders are in
best quality.
Receiving report to receive all authorized order and inspect the
quality, quantity, and product description is correct.
Invoice is sent by the supplier to indicate that the products are
already delivered and received.
The

triangulation

of

the

three

documents

is

to

ensure

data

consistency. If data in the three documents is consistent, then a

payment authorization can proceed.

b Analyze all of the documents above and determine whether the clerk
should prepare the cheque and send it to supplier?
A comparison of the three documents (see table below) shows that
while the purchase order and receiving report match (i.e., we received
what we ordered), the amount on the invoice does not agree. The
discrepancy comes from all items (except item no 3).
Therefore, the cheque should not have been prepared and certainly
not signed.

PO Incomplete information
No reference number (PO Number); No product code number;
incomplete Vendor address; Not getting approval by higher authority
Receiving report
No segregation of duty (same person prepare and authorized the
receiving report)
Product price indication
Invoice Wrong quantity ordered
The price of item no 4 has increased
Item no 5 is not charged (missing form invoice)
Amount payable is same with Purchase order, so might create error in
capturing data (payable and detail of inventory count)

c Explain the importance of remittance advice that is contained as a part

of the invoice?

Turnaround document

becomes an input of another process.

RA generated as part of the billing and will be an input as part of

- that is an output of one process and

the cash receipts. This provides the details of the cash receipt
for the entry into the system and ensures that all relevant details
are provided (e.g. customer, invoice number, amount, due date).

Thus it allows the matching of receipts to invoices.

RA allows for the separation of payments received in the
mailroom from the remittance advice, an important control in
cash receipts.

d Suggest and explain FOUR (4) types of edit checks can be performed
on all these forms if these forms are available on the computerized
purchase system.

Field check:
Ensure that all fields are fulfill its data type such as order date field
should be date field, account code should be alphanumeric, amount
should be numeric/currency and positive value.
Completeness:
Ensure that all required field are filled in such as vendor address in
this case. Make sure quantity order is completed.
Reasonableness check:
Ensure that data entered are reasonable and interrelated. In this
case, when the accounts department wants to make a payment to
supplier, the invoice to be paid should reflect the product that already
received. Thus, the invoice should indicate which receiving report is
being paid.
The PO date should be earlier than Receiving date. The receiving date
should be earlier than invoice date.
Validity check:
Ensure there is no new addition data to existing master file such as
vendor code/vendor name, and item code/item. Any new additional
items should be approved by the respective manager (purchase
manager).
e TWO (2) internal control limitations:
Collusion
Judgment error
Unexpected transaction/events
Management override
Conflict