Chapter 14

Financial system and procedure

• System
– A group of independent but interrelated elements
comprising a unified whole
– A process for obtaining an objective

• Policy
• Guidelines
• It differs as per companies
• For example XYZ company has a policy of making
payment only after 2 weeks of the goods
delivered
• Procedure
– A set of sequence of steps

Advantages of formal system

– Easy to follow and give instruction
– All transaction will be recorded same way
– Easy to detect fraud and error
– New staff can be trained quickly
 Purchasing system
• Requisition
• Ordering
• Goods received
• Invoiced received
• Invoice recorded
• Payment made
 Sales system
• Order received
• Order processed
• Goods dispatched
• invoicing
• Recorded in the accounts
• Payment received
 Payroll system
• Hours or days worked
• Overtime
• Pay rates obtained
• Pay calculated
• Deductions calculated
• Net pay paid to employees
 The cash system
• Receipts system
• Payment system
• Petty cash system
 Inventory system
• Purchase system of raw material
• Work in progress
• Finished goods
• Inventory sold
 The purpose of organizational control
• Safeguard companys assets
• Efficiency
• Prevent fraud
• Prevent errors
 Automated systems
• Bespoke system
• Off the shelf package
 Features of automated system
• Uniform processing of transaction
• Lack of segregation of functions
• Potential for data to corrupted easily
• Potential for increased management
supervision