Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What is the purpose of obtaining documentation prior to making a payment?

1. To authorize employee dismissals

2. To ensure proper payment justification

3. To calculate overtime

4. To update payroll records

The correct answer is: To ensure proper payment justification

The purpose of obtaining documentation prior to making a payment is primarily to ensure proper payment justification. This involves verifying that a payment is legitimate, that the terms of any agreements have been fulfilled, and that there is sufficient reason for the payment to be made. Documentation acts as a control mechanism, providing a clear audit trail and substantiating the expenses incurred. This practice helps organizations prevent fraud, errors, and unauthorized payments, ensuring that all disbursements are appropriate and well-founded. Obtaining documentation does not relate to authorizing employee dismissals, as that process typically involves HR policies and performance evaluations. Calculating overtime is based on specific employee work hours and rates, which does not inherently require payment documentation before disbursement. Updating payroll records is an administrative task that might occur after payments are made but is not directly linked to the justification for making a payment itself. Therefore, ensuring proper payment justification is the central focus when obtaining documentation prior to a transaction.