Internal Check Trading Transactions
following system of internal check may be adopted as regards purchases.
A purchase department should supervise and
control the entire purchase transactions of the organisation.
The procedure for purchases should start with
issuing purchase requisition, making enquiry about the terms and conditions of
purchases from different suppliers.
Purchase requisition should be in a printed
form and serially numbered. They should be given to all the departments in the
On receipt of requisition from various
departments, the purchase department should send enquiry letter to the
The purchase department, after verifying the
quotation should place an order with the supplier.
All the purchase orders should be signed only
by the Purchase Manager or any responsible person on his behalf.
Goods should be received by a responsible
official and entered in the goods received note and the same should be recorded
in the goods received register.
On receipt of invoice from the supplier, the
purchase department should check the invoice with the goods received note and
verify the rate, discount, quality and quantity of goods.
Goods received should also be entered in the
stores ledgers and entries should be made in the bin card.
accounts department should verify the purchase invoice with the goods received
note and purchase order before making payment.
making payment, the accounts department should affix a rubber stamp on the
invoices in order to avoid duplication of payments.
frequent intervals a responsible person should check the entries in the
purchase book with supplier ledger account.
goods are returned to the supplier it should be entered in purchase returns
credit note should be obtained from the supplier for each return of goods and
the note should be attached to the invoice.
purchase department should check such advice note with invoice and enter in
purchases returns book.
only part of the goods or returned to the supplier, the goods which are
accepted alone should be entered in the stores ledger.
are the most important source of revenue in a business and hence the
possibilities of errors and frauds taking place are greater. Frauds maybe
committed in the following ways:
Sales may be omitted from recording in the sales
Fictitious sales may be accounted.
Sale of fixed assets may be treated as sale of
to overcome the occurrence of such type of frauds, an effective system of
internal check as regards credit sales is necessary that may be in the following
receipt of order from the customers, it should be numbered and the particulars
entered in the order received book.
order copy should be handed over to the dispatch department who makes necessary
arrangements for delivery of goods.
the goods ordered or ready for delivery the dispatch department should inspect
the goods with the order copy and enter the details of goods delivered in the
invoice should be prepared based on the dispatch memo in three copies, one copy
should be sent to the customer, second copy to the accounts department and
third copy will be retained by the sales department.
responsible official should check the particulars in the invoices and also
confirm that the terms and conditions in the order have been duly followed and
finally he should put his initial on the invoice.
The gatekeeper should
record particulars of the goods leaving the premises in the goods
persons who are responsible for preparing the invoices should not be allowed to
post the entries in the customer’s accounts.
frequent intervals, the balances in the customers’ accounts should be verified
with the confirmations received from the customers.
9. A responsible
official should verify that only sale of goods are accounted in sales day book
and sale of assets are not accounted.
10. A responsible official should
deal with customers enquiries, overdue accounts and writing off bad debts.
The goods returned by customer should be
entered in the sales return book and reason for the return should also be
The gatekeeper should also enter the goods
received in the goods inward book.
A credit note should be prepared, duly checked
and initiated by a responsible official.