FIA FA1

REORDING PAYMENTS
CONTROLS OVER RECORDING
PAYMENTS
 Controls over recording payments are
important to avoid fraud and to ensure
completeness.
 Bank reconciliation is the most important

control
Controls over recording payments
Controls to avoid fraud
 Bank reconciliation

 Authorisation of payments

 Supporting documentation

 Segregation of duties

 Check for unusual payments

 One cheque book in use

Controls over recording payments
Controls to ensure completeness
 Regular bank reconciliations to take place
 Cheques to be issued in sequence
 A sequence check to be carried out on the

cheques entered in the bank ledger account

 Regular examinations of the bank statement

to ensure all payments by direct debit and

standing order have been recorded in bank
ledger account.
Further details on control procedures and
reason
Control procedure reason
One cheque book in use at a time So as to keep rest of cheque books
under lock and key – vulnerable to
theft.
Entering all cheques in bank ledger To ensure all cheques from cheque
account even if cancelled book are recorded
Retain all cancelled cheques Provide evidence that cheque has
not fallen into wrong hands
Writing cheques and recording in Its less tempting by an employee
cashbook done by different people to act dishonestly
Authorized details of standing So as to avoid recording wrong
order and direct debits payments payments.
filed and agreed before recording
in bank ledger account
Recording payments
— Analysis of the bank ledger account payments will help to
control the expenditure of the business.

Posting the payments to the general ledger

Step 1 Add up all the columns on the payments side of the bank
ledger account.

Step 2 Check that the analysis columns totals (excluding the

discount received memorandum column) add up to the
total cash paid column.
Recording payments
 Step 3 Identify the general ledger account by marking against
the bank ledger account amount.

 Step 4 Draw up the posting summary and post the general

ledger.

 In a computer system, updating the payables ledger for

payments will usually cause an automatic updating of the
bank ledger account.
Computerization of payments
recording
 As transactions are recorded in payables
ledger, cashbook will automatically be
updated
 Option exists to produce computer printed

cheques
 Cheques will automatically be produced from

the ‘payments list’ that have been dated.

Other tasks performed by
computerized payment recording:
 Cheque will be printed out ready to sign.
 Balance on payable ledger account

automatically updated
 Cash account in general ledger will

automatically be updated
 Payable general ledger account will also be

automatically updated
 Remittance advice will automatically be

printed to be attached to cheques

Automated credit system(ACS)
 Automated credit systems are useful methods of making and
recordng payments and can save a business time.
 ACSs operate the electronic transfer of funds between
accounts within the banking system
 The system acts as automated clearing system
 The business sends information that is input into its books to
the bank for processing.
 ADVANTAGES OF ACS
 Operates with very reduced amount of paper work hence
reduced operational cost
 Enhanced security of information
 Speed of processing
Uses of ACSs
Used in processing the following
 Standing orders
 Direct debits
 Monthly salaries
 Weekly wages
 Other one off payments
 BACS
 CHAPS
 BACS
 Bankers Automated Clearing System (BACS)
 A secure service enabling organizations to

make payments directly into another bank.

 Used to make fixed regular payments such as

salaries, pensions, tax credit etc.

 A cheap way to make payments
 Not suitable for same day payments as it

takes on average 3 days.

CHAPS (Clearing house automated payment system )

 It is a British company that offers transfers of

high value transactions from one bank to
another.
 Provides same day payment guarantee
 No limit on transaction value to be

transferred
 Not available at all banks so limited service.
 Quite expensive service between £15 and £30

per transfer.
Procedure for using automated
credit systems
 Entity to produce file with details of recipients
(name, amount, bank, branch, account
number).
 Information submitted to computer that
processes it so as to be available to banks
 On specified day, bank credits recipients and
debits entity
 Business records updated with same
information
 Item recorded on archive disks for future
reference.