Information sheet 1 Verify validity and accuracy of payment request

Introduction
A payment request, also known as a request for payment, is a nonstandard request by a
department for approval of payment by the company for goods or services delivered.

Accounting process begins with the origin of business transactions and it is followed by analysis
of such transactions. A business transaction is a transaction, which involves exchange of values
between two parties. Every transaction involves Give and Take aspect. The debit represents Take
aspect and credit represents the Give aspect in a transaction. For example, when a computer is
purchased for office use for cash, then the delivery of computer represents Take aspect and
payment of cash represents Give aspect. Thus, business transactions are exchange of goods or
services between two parties and effects of these transactions are recorded in two accounts.

To verify validity and accuracy of payment request you should perform the following
activities:

1.1 Match Payment requests to orders

1.2 Check Supporting(source) documentation
1.3 Obtain Confirmation of goods or services supplied

Payment requests are matched to order or other supporting information to ensure validity of
payment and to comply with internal control requirements

Payment requests may include:-

 Claims
 commissions
 management expenses
 periodic payments
 return of premium
 Miscellaneous expenses.

Source Documents
All business transactions are based on documentary evidence. A Cash memo showing cash sale,
an invoice showing sale of goods on credit, the receipt made out by the payee against cash
payment, are all examples of source documents.
A document which provides evidence of the transactions is called the Source Document or a
voucher. It is the primary evidence in support of a business transaction. A source document is the
first record prepared for a business transaction and is the basis for entries in the books of
accounts.
Source documents are used as the source of the accounting entry. They are the first document in
the accounting process cycle. For the accounting records to be accurate, it is essential that the
source documents are accurate. Accuracy involves both accuracy of the information included in
the document and the validity of the document itself.

When checking the accuracy of any source document, you should consider the following:

 Is the date correct?

 Are the details of the supplier or customer correct?

 Is the document mathematically correct? Are the calculations correct?

 Are there any other obvious errors? (This may include price or quantities or description of
the goods or services.)

The validity of the document should also be verified:

 Does it represent a valid transaction? For example, does the invoice represent goods or
services that the organisation has received? This includes instances where goods or services
may not have been completely supplied.

 Has this document been received and/or processed previously?

Business document for payment request

Purchase requisition:-

 The purchase requisition is the document used to inform the purchasing officer that goods
or services are desired for the organization.  It is the basis for the preparation of a
purchase order.
  A purchase requisition form is a document used by a department to request that the
purchasing department order materials or merchandise. In other words, this form is used
by departments to notify the purchasing department that raw materials are needed for
production or merchandise is needed for the sales floor.
  Depart managers are usually not allowed to place orders directly with suppliers for
control purpose. Two copies of the purchase requisition are sent to the purchasing
department which then send one copy to accounting department and the requesting
department keeps third copy.

PURCHASE REQUISITION FORM

DEPARTMENT 1 DATE 4

ACCOUNT NO.  2 REQ. NO.  5

DATE WANTED 3 PURCHASE ORDER NO.  13

QUANTITY
FULL DESCRIPTION OF UNIT PRICE TOTAL
REQUIRED PURCHASE

6 7 8 9

PURPOSE FOR THIS ORDER: 10

SHIP PREPAID TO:__________ ______11

Address:

The items listed above are a proper charge against the appropriation shown hereon and the
services or materials are to be used exclusively for the purpose against which said items are
charged.
Approved: _______________12
Fiscal Coordinator
Review Requisition for Accuracy, Completeness and Availability of Funds
The purchase requisition is to be reviewed by the purchasing officer for accuracy and
completeness and by accounting for availability of funds

Purchasing Officer Review the purchase requisition:

 Ensure that the requisition number is unique.

  Double check the mathematics for accuracy.
 Verify that the signature(s) of approval are authorized by officials of the department.
 Verify that the items to be purchased are covered by the blanket purchase order number,
if applicable.
 If the items are not available, assign a purchase order number. For preparing a blanket
purchase order

If the purchase requisition is not accurate or complete, return copies 2 and 3 to the
responsible staff.

If the purchase requisition is accurate and complete, forward the third copy of the requisition
to accounting.

Why is the Purchase Requisition Important in the Procurement Process?

It Initiates the Purchasing Process: Departments in a business will, from time to time, need

materials; the purchasing request will initiate the purchase process. The purchasing

department will be acting on the strength of the document. If there are any issues, the document

will serve as evidence that a given communication was made.

It is a Control Tool: Where there are no proper checks, a departmental manager or staff may

engage in fraud, where they order materials for personal use. With a formal purchase request,

there are measures in place to ensure that no fraud is practiced.

Protecting the Business: With requisition orders in place, chances of fraud are prevented. There

will likely not have a situation where staff or departmental managers connive with vendors to

steal from the business. The company assets are also protected.

Purchase order
 A purchase order is the official confirmation of an order. It is a document sent from a
purchaser to a vendor that authorizes a purchase.
 A purchase order is a commercial document and first official offer issued by a buyer to a
seller, indicating types, quantities, and agreed prices for products or services the seller
will provide to the buyer.
 Purchase order authorizes a vendor to ship ordered merchandise at the stated price
 When purchasing department receives purchase requisition it prepares at least five copies
of purchase order
  Copy1: to the vendor as a purchase request and as authority to ship
merchandise
 Copy2: to the accounting department where it is entered in the voucher and
used in approving payment of invoices
 Copy3: to the requesting department to inform its manager that action is being
taken
 Copy4: to the receiving department so it can compare with goods received and
provide independent count of goods received
 Copy 5: retained on file by the purchasing department

Purchase order form

TO: 1 DATE 2 REQUISITION ORDER NO.  3

WANTED 4 PURCHASE ORDER NO.  5

QUANTITY DESCRIPTION UNIT PRICE AMOUNT

ORDER

6 7 8 9

PLEASE SIGN ATTACHED

VOUCHER AND RETRUN ONLY FOR
PAYMENT

SHIP TO: 10 SIGNED 13

Purchasing Officer F.O.B.  11
TERMS 12
Purchasing Officer
Receive requisition from requisition department.
Evaluate the need for item(s).
Receive verification from finance that funds are available to cover the purchase.
Complete the purchase order
Why do companies use purchase orders?

Purchase orders are used for several reasons:

They set clear expectations – Purchase orders enable purchasers to clarify their exact needs to
vendors.

They help manage orders – Many businesses designate certain individuals to manage
inventory, which typically includes processing incoming orders. These individuals are typically
in procurement, finance, or operations. Purchase orders give these individuals official
documentation of incoming or pending deliveries, enabling them to track and manage orders
more effectively.

They help with budgeting – Once a purchase order is created, purchasers can immediately
factor these costs into company budgets. Businesses benefit from having clear records of exactly
how much money is being spent and where it’s going.

They are a key part of audit trails – Auditors are on the lookout for financial discrepancies.
They’ll be particularly interested in goods and services coming in and payments going out.
Issuing, processing, and recording purchase orders is a great way to keep auditors happy.

The benefits above are geared towards purchasers, but POs are important documents for vendors
as well. Vendors use them for order fulfillment and payment processing.

Purchase Requisition vs. Purchase Order – What is the Difference?

Purchase requisitions are a document used when an employee needs to make a purchase or

an order request on behalf of their company.

It is a document that is used to inform department managers or the purchasing officer of the

decision so that the purchasing department can start the purchasing process.

Purchase orders are issued by the purchasing department after a purchase requisition has been

made and passed the approval process.

They are documents sent from a buyer to a supplier with a request for an order, and are a legally

mandatory document.
What is an Invoice? 
An invoice, sometimes called a sales invoice, is a document sent by a provider of a product or
service to the purchaser. The invoice establishes an obligation on the part of the purchaser to pay,
creating an account receivable. . 
An invoice is an acknowledgement issued by the vendor to the purchaser of goods or services to
request for the payment of goods sold or services rendered by him.
It is a non-negotiable legal document which identifies the buyer and seller of the stuff. It contains
details regarding quantity, price, discount, taxes, the total amount due for the payment, invoice
number, date of issue of invoice and the seller’s signature.

The instrument is delivered prior to the payment of the goods for indicating the amount due
against the merchandise.

An invoice is an itemized statement of goods prepared by the vendor listing the customer's
name, items sold, sales prices, and terms of sale.

 An invoice is also a bill sent to the buyer from the supplier.

 From the vendor's point of view, it is a sales invoice.

 The buyer, or vendee, treats it as a purchase invoice.

When receiving a purchase order, the vendor ships the ordered merchandise to the buyer and
includes or mails a copy of the invoice covering the shipment to the buyer.

The invoice is sent to the buyer's accounting department where it is placed in the voucher.

What is an invoice?

An invoice is a non-negotiable piece of paper or file issued by the seller or buyer. It includes the
trading parties, the items or services sold, date of item/services shipped or completed, process
and discounts and payment terms.
Difference between Invoice and Receipt
Both invoice and receipt are non-negotiable commercial instruments, which are used during the
course of a transaction. While an invoice is a document, made by the seller and issued to the
buyer, so as to authorize the sale. It contains the details of the goods and contains the name and
address of the parties to transaction, price, discount, date, and place of delivery.
In contrast, receipt, is a simple official acknowledgment, that the goods or services have been
received. It is prepared by the vendor and given to the consumer and is used to show the
ownership of the item. These terms are widely used in business parlance, as these are related to
operational activities.

BASIS FOR INVOICE RECEIPT

COMPARISON

Meaning An invoice is a commercial document A receipt is a document issued by

issued by the vendor to the purchaser the vendor to the purchaser after
to request payment the final payment is done.
Time of Issue Before the payment. After the payment.
 Importance To record the details of the
merchandise sold, but the payment is
yet due against it.
Details Quantity, unit price, invoice number,
discount, taxes and total due.
To act as an evidence that the
payment for merchandise bought
has been done.
Quantity, unit price, receipt
number, discount, taxes, the total
amount paid and mode of
payment.

Key Differences between Invoice and Receipt

 An Invoice is a request for payment and receipt is a confirmation of payment.
 The significant difference between the two is that the invoice is issued prior to the
payment while the receipt is issued after the payment.
 The invoice is used to track the sale of goods or services. On the contrary, receipt acts as
documentation for the buyer that the amount of the merchandise has been paid.
 The invoice indicates the total amount due whereas the receipt indicates the total sum
paid along with the mode of payment.

Definition of Invoice
An invoice is an acknowledgement issued by the vendor to the purchaser of goods or services to
request for the payment of goods sold or services rendered by him. It is a non-negotiable legal
document which identifies the buyer and seller of the stuff. It contains details regarding quantity,
price, discount, taxes, the total amount due for the payment, invoice number, date of issue of
invoice and the seller’s signature. The instrument is delivered prior to the payment of the goods
for indicating the amount due against the merchandise.

Definition of Receipt
A receipt is a commercial legal instrument used for stating that some goods or services of value
have been received. It is issued by the vendor to the purchaser to act as proof that payment has
been made. The receipt is issued after the payment of the stuff. The document contains details of
buyer and commodity like quantity, price, taxes, discounts, mode and date of payment, the total
amount paid, receipt number and signature of the seller or his authorized agent.

Similarities
Both are commercial documents.
Both are a part of the purchase cycle.
Both contain details about buyer and seller.
Both are legally non-negotiable instrument.
What Does an Invoice Include? 
The usual sections in an invoice include:

 The date that the invoice was created. Don't forget this! The date of the invoice starts the
clock ticking on the customer. If you have terms (a time limit for payment), you want to
include the date so everyone knows when the payment is due. 
 Names and addresses of customer and supplier. If you're creating the invoice in
accounting software, you may only need the email address of the customer, but it's still a
good idea to collect and include the physical address, in case you need to send a real
letter or document.

 Contact names of individuals at the two businesses (or business and individual). It's a
good customer relations rule to make sure you spell names correctly. 
 Description of items purchased, either products or services, including prices and
quantities. Often you will have standard item descriptions and inventory numbers. But be
as specific and detailed as possible, when you create the invoice. This avoids confusion
and "I didn't know" issues. 
 Terms of payment. For example, the provider might specify "net 30 days," which means
that the entire amount is due within 30 days.

When receiving a purchase order, the vendor ships the ordered merchandise to the buyer
including a copy of invoice covering the shipment to the buyer. The invoice is sent to the buyers
accounting department where it is placed in the voucher

Checking source documents

Different source documents may require specific checking processes.

Invoices
The details on the invoice should be checked to the original order for quantities, price and
description. They should also be checked against delivery receipts to ensure that the goods were
received in good order and condition.

Receipts
For receipts, it is important to record information such as method of receipt—is it cash, cheque
or credit card?

Cheques
The information recorded on the cheque must be identical to that recorded on the cheque stock. It
should also agree with the details on the authorisation document from which the cheque has been
prepared.

Confirmation of goods or services supplied

Receiving report

When shipment arrives receiving department should count

 Count the goods

 Check them for damages and agreement with the purchase order

Then it prepares four or more copies of receiving report which is used in the company

 To notify the appropriate person that ordered goods have been received

 To describe the quantities and conditions of the goods

Copy1: to accounting department and placed in the voucher

Copy2: to the requesting department

Copy 3: purchasing department

Copy4: receiving department retains copy in its file

Information sheet 2 Prepare Payment Documentation

In most businesses, employees seeking reimbursement need to get their reimbursement

approved before the company can process payment. This voucher system used by a company
makes certain that cash payments are properly authorized and validated before a check is
issued. This section focuses on the voucher system and how reimbursements are authorized,
validated, and recorded before issuance of a reimbursement check.
In this section we use the steps taken when a company purchases goods to explain how a
voucher system works. The steps include the following:
1. Preparing a purchase requisition and getting it authorized.
2. Preparing a purchase order, which specifies details such as company, number of items, and
so forth, and getting it authorized.
3. The vendor receiving the purchase order preparing a sales invoice specifying number and
type of goods and price.
4. The company receiving the goods inspecting the shipment, checking it against the purchase
order and the sales invoice, and completing a receiving report.
5. Issuing payment in the form of a check.
These steps show internal control, in the form of a voucher system, at work. Other procedures
that are part of internal control, include banking procedures and petty cash and change funds.
In order to prepare payment documentation you should check

2.1 All payments are coded and allocated to accounts accurately with payments matched against
invoice or other relevant documentation
payments are coded and allocated:
 cost centres
 organisation or system chart of accounts
2.2 All documentation is completed in accordance with organization policy and procedure
 computer system documentation
 internal control guidelines
 operations manuals

Invoice Approval
When a receiving report arrives, the accounting department should have copies of the
following documents in the voucher:
 Purchase requisition,
 Purchase order, and
 Invoice.
With the information in these documents, the accounting department can record the
purchase and approve its payment.
In approving an invoice for payment, it checks and compares information across all
documents. To facilitate this checking and to ensure that no step is omitted, it often uses an
invoice approval, also called check authorization
An invoice approval is a checklist of steps necessary for approving an invoice for recording
and payment. It is a separate document either filed in the voucher or preprinted (or stamped)
on the voucher.
As each step in the checklist is approved, the person initials the invoice approval and records
the current date.
Final approval implies the following steps have occurred:
 Requisition check: Items on invoice are requested per purchase requisition.
 Purchase order check: Items on invoice are ordered per purchase order.
 Receiving report check: Items on invoice are received per receiving report.
 Price: Invoice prices are as agreed with the vendor.
 Calculations: Invoice has no mathematical errors.
 Terms: Terms are as agreed with the vendor.

What is a voucher? A voucher is a written authorization form that is used for every cash
payment the company makes. It contains all the details of the transaction in question along with
the signatures of appropriate employees as authorization. A voucher system, then, is a system
in which no payment is made without an approved voucher.

A voucher is an internal document describing and authorizing the payment of a liability to

a supplier. It is most commonly used in a manual payment system. A voucher typically contains
the following information:

 The identification number of the supplier

 The amount to be paid
 The date on which payment should be made
 The accounts to be charged to record the liability
 Any applicable early payment discount terms
 An approval signature or stamp

Once an invoice has been checked and approved, the voucher is complete. A complete voucher
is a record summarizing a transaction. Once the voucher certifies a transaction, it authorizes re-
cording an obligation. A voucher also contains approval for paying the obligation on an
appropriate date. The physical form of a voucher varies across companies. Many are designed
so that the invoice and other related source documents are placed inside the voucher, which can
be a folder. Completion of a voucher usually requires a person to enter certain information on
both the inside and outside of the voucher. A complete voucher is sent to an authorized
individual (often called an auditor). This person performs

 a final review
  approves the accounts and amounts for debiting (called the accounting distribution),and
 Authorizes recording of the voucher.

Preparation of Accounting Vouchers

Accounting vouchers are the written documents containing the analysis of business transactions
for accounting and recording purpose. These are prepared by the accountant and countersigned
by authorized person.
Features of accounting vouchers are as:
 It is a written document.
 It is prepared on the basis of evidence of the transaction.
 It contains an analysis of a transaction i.e. which account is to be debited and which is to
be credited.
 It is prepared by an accountant and countersigned by the authorized signatory.
 Accounting voucher may be classified as Cash voucher i.e., debit voucher, credit
voucher, and non-cash voucher i.e., transfer voucher.

Types of accounting voucher

Cash Voucher Non-Cash Voucher

Transfer voucher
Debit voucher Credit voucher [For Non-cash Transaction]

[For Cash Payments] [For Cash Receipts]

Debit Vouchers
These vouchers are prepared for recording of transactions involving cash payments only. Cash
payments in the business are made on account of:
 Expenses  Payment to creditors
 Purchases of Goods  Repayment of loans
 Purchases of Assets  Drawings and advances etc.
All cash payments, one aspect is cash and the other is either the party to whom the payment is
made, or an expense or an item of property for which the payment is made. A format of debit
voucher is as follows:
 Firm’s name
Debit Voucher
Voucher No. Date:
Credit Account:
Amount:
Debit account

S.No Account Name . Amount Narration (i.e. Explanation)

Authorized By: Prepared By:

Illustration 1
On September 21, 2006 M/s Mohit Chemicals received Br.40000 in Cash and balance amount of
Br.160000 by Banker’s Cheque from HT Chemicals Ltd., Prepare Debit Voucher.
Mohit chemicals
Debit Voucher
Voucher No. 22 Date: 21, 2006
Credit Account: HT Chemicals Ltd
Amount: 200000.
Debit account
S.No Account Name . Amount Narration (i.e. Explanation)
1. Cash 40,000 Received part payment in cash and
2. Bank 160,000 Balance by bank cheque

Authorized By: general manager Prepared By: cashier

Credit Vouchers
These vouchers are prepared for recording of transactions involving cash receipts only. Cash
receipts in the business are accepted on account of:
 Cash sales of goods  Cash receipts from debtors.
 cash sales of asset  Loan taken
 revenue income like interest, rent,  Cash withdrawn from bank\
etc. received in cash  Receipts of advances, etc.
In all cash receipts, one aspect is cash and the other is either person or party from whom cash is
received or revenue on account of which cash is received or the property on sale of which cash is
received. A format of credit voucher is as follows:
Firm’s name
Credit Voucher
Voucher No. Date:
Debit Account:
Amount:
Credit account
S.No Account Name . Amount Narration (i.e. Explanation)
 Authorized By: Prepared By:

Illustration 2
Br.25000 Office furniture is purchased from Modern Furniture on July 4, 2006 and Br.15000 are
paid by cash immediately and Br.10000 is still payable. Prepare Credit Voucher.
Firm’s name
Credit Voucher
Voucher No. 126 Date: July 4, 2006
Debit Account: furniture
Amount: 25,000
Credit account
S.No Account Name . Amount Narration (i.e. Explanation)

1 Cash 15,000 Purchase of Office furniture

2 Modern Furniture
from Modern Furniture. Cash
paid. Br.15000, for the Balance
Liability created as per terms of
purchase.
10,000

Authorized By: Prepared By:

Transfer Vouchers
With the expansion of business, the role of credit transactions is increasing at a fast pace. For
recording of these credit transactions, a voucher is prepared known as transfer voucher. These
transfer vouchers are prepared to record non-cash transactions of the business involving:
 Credit purchases  Return of goods purchased on credit
 Credit sales  Depreciation on Assets
 Return of goods sold  Bad Debts etc.

These vouchers are prepared both in debit and credit forms simultaneously.

Firm name
Transfer Voucher
Voucher No. : Date:
Amount:

Debit account
S.No Account Name Amount Narration (i.e. Explanation)
Credit account

S.No Account Name Amount Narration (i.e. Explanation)

Authorized By: Prepared By:

Illustration 3
Stationery Mart furnishes the following information:April 1,2006
Opening Balances:
(i) Cash Br.13000 (iii) Furniture Br.22000
(ii) Bank Br.5000 (iv) Land and Building Br.125000
(v) Trade Debtors: (viii) Trade creditors:
Samuel Br.16000 Sami Br.18000
Sara Br.14000 Bella Br.24000
Secured Bank Loan Br.70000 Veronica Br.8000
Prepare transfer Voucher.

Stationery Mart
Transfer Voucher
Voucher No. : Date: April 1,2006
Amount:

Debit account
S.No Account Name Amount Narration (i.e. Explanation)
1 Cash 13,000 Opening balance
2 Bank 5,000 Opening balance
3 Furniture 22,000 Opening balance
4 Land and building 125,000 Opening balance
5 Trade debtors 30,000 Opening balance
Samuel 16,000
Sara 14,000

Credit account

S.No Account Name Amount Narration (i.e. Explanation)

Secured bank loan 70,000 Opening balance

Trade creditors 50,000

Sami 18,000
Bella 24,000
Veronica 8,000
Capital Opening balance
120,000

Authorized By: Prepared By:

After a voucher is approved and recorded (in a journal called a voucher register), it is filed by
its due date.
 A check is then sent on the payment date from the cashier,
 the voucher is marked "paid," and
 The voucher is sent to the accounting department and recorded (in a journal called the
check register).
The person issuing checks relies on the approved voucher and its signed supporting documents
as proof that an obligation has been incurred and must be paid.
 The purchase requisition and purchase order confirm the purchase was authorized.
 The receiving report shows that items have been received, and
 The invoice approval form verifies that the invoice has been checked for errors.
 There is little chance for error and even less chance for fraud without collusion unless all
the documents and signatures are forged.

Information sheet 3 authorize payment