EXPENDITURE PHYSICAL CONTROLS:

SUMMARY OF EXPENDITURE CYCLE CONTROLS OF COLUMBIA COMPUTER

CENTER
CONTROL ACTIVITY

PURCHASES
PROCESSING SYSTEM

TRANSACTION
AUTHORIZATION
SEGRAGATION
DUTIES

Accounting Department
OF Inventory In Charge
separate from Accounting
Department. Accounts
Payable subsidiary ledger
(file) separate from the
general ledger.

SUPERVISION

Receiving Area,
Accounting Department,
Purchasing/ Procurement
Department, General
Ledger Department
(All departments
encompassing Purchases
Processing System)

CASH DISBURSEMENT
SYSTEM
Accounting Department
authorizes payment
Accounts Payable
subsidiary ledger (file),
cash disbursements, and
General Ledger.

Accounting Department,
Cash Disbursement
Department, General
Ledger Department
(All departments
encompassing Cash
Disbursement System)

ACCOUNTING RECORDS

Accounts
Payable
Subsidiary Ledger (File),
General Ledger, Purchase
request, Purchase Order,
Inventory Level report,
Valid Vendor File, List of
Accounts, Receiving report
file

Voucher
Payable
File,
Accounts
Payable
Subsidiary Ledger (File),
Check Register, General
Ledger cash accounts

ACCESS

Security of inventory. Limit

access to the accounting
records. Authorization of
access by the Accounting
Department.

Security of cash. Limit

access to the accounting
records. Authorization of
access by the Accounting
Department.

INDEPENDENT
VERIFICATION

Each
transaction
is Each
transaction
is
reviewed and identified if reviewed and identified if

accompany with proper

supporting
documents.
General Ledger reconciles
overall
accuracy
of
process.

accompany with proper

supporting
documents.
Overall reconciliation by
general ledger.

TRANSACTION AUTHORIZATION
PURCHASES SUBSYSTEM
The inventory in charge monitors the inventory levels of the business. Constantly,
the inventory in charge makes an inventory report stating the status and level of
the inventory. The inventory in charge forwards the inventory report and valid
vendor file to the accounting department. The accounting department head formally
authorizes the replenishment with a purchase request.
CASH DISBURSEMENT SUBSYSTEM
Since the business is not that big, the Accounting Department head, who authorizes
the replenishment of inventory, also authorizes the cash disbursement through the
cash disbursement voucher. The cash disbursement department write checks
subsequently the authorization coming from the Accounting department. The
authorization and the issuance of checks are separated in order to promote
effective control. In order to verify the check issued by the cash disbursement
department, a check register containing the voucher form number, check number
and other data in the check register authorizing the release of each check.

SEGREGATION OF DUTIES
SEGREGATION
DEPARTMENT

OF

THE

INVENTORY

IN

CHARGE

AND

ACCOUNTING

The inventory in charge is involved in the custody of inventory at the same time
monitoring the inventory level. Moreover, the detailed records of the inventory are
filed and forwarded to the encoder or record in charge. The Accounting department
that is in charge of authorizing purchases and cash disbursement is separated from
the inventory in charge that makes the inventory report. Segregation of people in
charge of the authorization, custody and record-keeping are abided through the
separation of each function.
SEGREGATION OF THE GENERAL LEDGER AND ACCOUNTING DEPARTMENT
FROM CASH DISBURSEMENTS

The records controlling this cash asset are the Accounts Payable file and documents
file (manual and software records). The accounts payable in charge, who maintains
the accounts payable file, is included under the Accounting Department. The
Accounting Department in charge of the authorization of cash disbursements is not
responsible on the issuance of check. Furthermore, the records and documents
pertaining to this asset are kept by the General Ledger Department.

SUPERVISION
Though supervision is of highest importance in the Receiving department, where the
inventory arrives and is logged in by the receiving clerk, the business implements
supervision exhaustively all throughout the departments. Supervision is
implemented in all departments through an Administrative Personnel. The admin
personnel execute supervision by using evaluation and performance checking.
INSPECTION OF ASSETS
The receiving department inspect the items delivered by the supplier; the quantity,
quality and price of the items are noted. Through evaluation and performance
checking executed by the admin personnel, inventory would be less susceptible to
inventory theft and failure to inspect inventory. While the receiving personnel are
physically counting and inspecting the goods, the admin personnel are assessing
whether they are performing properly these important duties.
Upon the arrival of the goods from the supplier, a packing slip containing quantity
information accompanies the goods. The admin personnel take custody of the
packing slip while receiving personnel count and inspect the goods.
THEFT OF ASSETS
The receiving section is usually chockfull of receiving personnel assisting and aiding
with the arrival of the goods from the supplier. During this time, inventories are
exposed to theft until they are securely moved in the storeroom. The admin
personnel see to it that proper inspection and checking procedures are followed.
Through the admin personnels evaluation and performance checking method, the
management would recognize whether such personnel are performing appropriately.

ACCOUNTING RECORDS

The business employs the following accounting records: check register, voucher
register, accounts payable subsidiary ledger, and general ledger. The business also
employs computer-based accounting records through the Quickbook software
records. Supporting information are also provided such as the inventory reports,
valid vendor file, purchase request, purchase order, list of accounts, and the
receiving report file. These files are properly stored and recorded manually and
through the Quickbook software.
ACCESS CONTROLS
Limitation and access controls of physical assets and documents depend only on the
recommendation of the persons in charge of it. The person who can only access
such physical assets and documents are the ones in charge of the said duties. But
such access on the physical assets and documents passes first through the
Accounting department.

DIRECT ACCESS
Direct access of the physical assets in the business such as inventory and cash are
bestowed upon the persons in charge of such assets. However, access of such
physical assets is limited only and with direct approval and consent of the
Accounting department.
INDIRECT ACCESS
The documents and records pertaining to the physical assets are kept and secured
in the records and documents department or General ledger department. Manual
documents and records are also encoded in the Quickbook software records.

INDEPENDENT VERIFICATION
Each of the transactions in the business has its own requirement to verify whether it
a valid transaction or not. The supporting documents are also inspected, reviewed
and identified if it really pertains to the said transaction. The existence of valid
supporting documents lessens the probability of unsound and fallacious transaction.
INDEPENDENT VERIFICATION BY THE GENERAL LEDGER DEPARTMENT
The General Ledger Department of the business receives and keeps all the journal
vouchers, summary reports of inventory levels, accounts payable, and cash
disbursements. The manual files and documents are stored and also encoded in the
software record. The General Ledger Department verifies the total Accounts Payable
due equivalent with the total inventories received and the total cash disbursed
equivalent with the total deductions in Accounts Payable Due.