Question 1 (32 MARKS)

a) Briefly explain why selling goods for cash poses a business risk within any organisation.

Having cash in a business is a security risk (1). There is a potential for theft and physical 2

harm to employees who deal with cash (1).

Available (2)
Maximum (2)

b) Explain why Groceries (Pty) Limited would sequentially number their documents used in the
purchases and payments cycle.

To ensure that completeness testing can take place to identify missing documents; 1

To provide each document within a document type e.g., each invoice, with a unique identity; 1

and
To facilitate cross-referencing. 1
Available (3)
Maximum (3)

c) Based on the documents given above, select five documents that are applicable to the
revenue and receipts cycle of Groceries (Pty) Limited and explain the purpose of each
document.
Customer order: external document sent by the customer which details the goods the customer 2
wishes to purchase.
Delivery note: records date, description and quantity of goods despatched to the customer and 2
is signed by the customer to acknowledge the receipt of the goods.
Back-order note: contains details of goods that could not be supplied when ordered by a 2
customer as there was no invertor available; reviewed to establish whether an order has been
placed with a supplier for the outstanding goods.
Credit note: an internal document sent to the customer to acknowledge that the customer’s 2
account has been reduced (credited) for some reason other than for a payment received, e.g.,
goods have been returned by the customer.
Goods-returned voucher: document made out by the company itself that is used to record the 2
details of goods that have been returned by a customer.
Available (10)
Maximum (10)

d) Based on the given control procedures at Groceries (Pty) Limited, indicate, the functional
area under which each control procedures (1 to 15) are most likely to occur.
Control procedure Functional area (15)
1 Credit management (1)
 2 Order Department (receiving customer orders and sales
authorisation) (1)
3 Warehousing/Despatch (1)
4 Despatch/ warehousing (1)
5 Despatch/ warehousing (1)
6 Credit management (1)
7 Despatch/ warehousing (1)
8 Recording of sales (1)
9 Invoicing (1)
10 Mailroom receipting/cashier/ Recording (1)
11 Goods returned function/ warehousing/despatch (1)
12 Ordering department (or warehousing). (1)
13 Credit management (1)
14 Invoicing (1)
15 Despatch/ warehousing (1)
Available (15)
Maximum (15)
Communication skills and clarity of expression 2

Total marks for question 1 (32)

QUESTION 2 (25 MARKS)

e) List and explain the two documents used under the receipt of goods in the purchases and payments
cycle.
Supplier Delivery Note (SDN) (1) • This is a document made by the supplier and details the 1
goods that are being supplied.
• It will cross referenced to the company’s order form,
and on delivery of the goods, will be signed by the 1
purchasing company to acknowledge the receipt of
goods.

Goods Received Note (GRN) (1) • Completed by the purchasing company when the goods 1
are delivered by the supplier.
• It records the actual goods received and will be cross 1
referenced to the supplier’s delivery note.
Available (6)
Maximum (4)

f) Based on the risks identified by Mathew Uhone, advise on the control activities that can be
put in place to mitigate the risks. Your answer should be in a table format. Marks are only
awarded for the control activities.
Risk Control activities
Acceptance of • The responsibility for receiving goods should 1
be designated to a goods receiving section
• Short deliveries as full deliveries that should be physically secured and access
• Damaged and broken items controlled.
• Items not ordered, and • On arrival of the delivery vehicle, goods
should be offloaded in the presence of a
• Goods not of the required type
goods receiving clerk who should:
or quality
o Obtain the supplier delivery note
1
from the delivery personnel any
referring to the order number
thereon, locate the purchase order
• Goods received notes not made out (that should have been filed
accurately or completely. numerically)
o Check the quantity and description
• No goods received note made out.
of goods delivered against the 1
purchase order and the customer
• Theft by employees or outside delivery note.
parties, for example, collusion with o Perform at least a superficial test of 1
supplier delivery personnel the condition of the goods delivered,
for example broken or wet boxes.
o Reject all incorrect deliveries and
clearly identify rejections on both
1
copies of the delivery note and
purchase order.
 o Accept goods short delivered but 1
identify such goods clearly on the
delivery notes and purchase order
(the quantity actually accepted must
be clearly identified)
o Include only those goods that have 1
been accepted on the goods
received note.
o Ensure that supplier’s personnel sign
both copies of the delivery note 1
including all amendments, for
example, identification of short
deliveries, and
o Sign the supplier delivery note. 1
• On transfer of the goods to the warehouse
(custody), the warehouse clerk should 1
compare the physical goods to the goods
received note and acknowledge receipt by
signing the GRN.
• Any discrepancies should be reported to the 1
warehouse controller immediately.
Because collision in this cycle is a major problem for many companies, isolation of 1
responsibilities, sound personnel practices and independent physical controls should be
implemented by all companies in the supply chain, for example, surveillance cameras, tracing
devices on supplier vehicles, should be implemented.
It is important that whenever a control procedure is carried out, the employee responsible for 1
the control should sign the relevant document record
Available (13)
Maximum (10)

g) Explain the following terms.

Segregation of duties
• Separation of functions, e.g., ordering, warehouse, processing receipts.
• Separation of responsibilities within functions, e.g., receiving order, picking, picking 1
control, invoicing. 1
Isolation of responsibilities
• Isolating responsibilities through granting access privileges, e.g., only credit controller
can approve orders in the pending order file. 1
• Having pickers, and the picking control clerk and dispatch controller signs the picking
slip. 1
Available (4)
Maximum (4)

h) List what can go wrong (risks) under the following in the purchases and payments cycle.
Orders
• not properly authorised 1
• not carried out timeously 1
• not at best prices/conditions 1
• incorrect goods ordered 1
Available (4)
Maximum (3)

Goods received
• not recorded (stock, purchases, creditors) or not accurately recorded 1
Available (1)
Maximum (1)

Recording (payments made)

• for goods not received 1
• at wrong prices 1
• discounts not utilised 1
Available (3)
Maximum (2)
Communication skills and clarity of expression (1)
Total marks for question 2 (25)