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Step 1 
Obtaining 
documentary evidence 
of the reason why the payment is being made and the 
amount of the payment. In the case of payments to suppliers, the documentary 
evidence will be a supplier's invoice (or statement). 
Step 2 
Authorisation
 
of the payment, which means giving formal 'official' approval to make the 
payment. 
Step 3 
Restricting the authority to actually make the payment 
to certain specified individuals. 
The difference between Steps 1, 2 and 3 can be illustrated with an example.
6.4.4 Example: controlling a payment 
Suppose that a company buys goods costing $5,000. 
Step 1 
It will receive an invoice from the supplier. This is the 
documentary evidence
of the 
reason for and amount of the payment. 
Step 2 
The invoice will be approved by the purchasing director. This approval is the 
authorisation of the payment
. 
Step 3 
At some time later, the payment will be made to the supplier, probably by cheque. For 
a payment of $5,000, perhaps only the finance director or managing director will be 
permitted to sign the cheque, and so the 
authority to make the payment 
would be 
limited to these two people. 
6.4.5 Authorisation 
Every payment must be approved by an 
authorised person
. This person will often be a manager or 
supervisor in the department that initiated the expense, but every organisation has its own system. The 
following control limits must be set. 

Which individuals 
can authorise particular expenses 

The 
maximum amount
of expenditure that an individual can authorise 
BPP Tutor Toolkit Copy

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CHAPTER 8
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THE ROLE OF ACCOUNTING