To test cost, what should be traced?

• A. Original purchase invoice
• B. Production cost records
• C. Third-party invoices
• D. Final sales invoices

Answer: (A)

Verifying cost relies on the actual expenditure documented by the supplier. The original purchase invoice provides the exact price paid, quantities received, discounts, and terms, and it is the primary evidence of the cost that should be recorded in the accounts. By tracing from this source document through the purchases ledger to inventory records, you confirm that the recorded cost matches the documented cost charged by the supplier. Production cost records are useful for how costs are built up in manufacturing, but they are internal allocations and may not reflect the actual purchase price, so they aren’t the best sole source for testing cost. Final sales invoices relate to revenue, not cost. Therefore, tracing the original purchase invoice is the most reliable way to test cost.