Unit -4

Vouching
Lalatendu Mishra
Jain University

Vouching
Vouching consists of comprising entries in books
of account with documentary evidence in
support thereof

the processing system to find the source

documentation that supports the transaction

Objective of vouching

authority and authenticity of transactions

Genuinely connected to the business

Documentary evidence

Pertain to financial year, related to business

unit

Difference between routine checking

and vouching
Arithmetical accuracy

Documentary evidence

Routine checking is a
part of vouching

Vouching does not

include routine
checking

Difference between routine checking

and vouching
Junior audit clerk

Senior audit clerk

Clerical error

Clerical error as well as

errors of principles

Types of voucher

Primary vouchers:

-written evidence in original

-evidence of a transaction or an entry example:
purchase invoices, cash memos of good
purchased, statement prepared by the bank
etc.

Collateral / secondary

-copies of original evidence ex: carbon copies of

a cash memo and rent receipts, counterfoils of
a pay-in-slip

Cash Sales

Examine cash book:

daily cash sales summary and copies of cash

memos
examine cash memos
-price, discount allowed and rates of sales tax
-the salesmen's summery to cashier's cash sales
summary and the gate keeper's goods
delivered summary
-whether the dates on cash memos and cash
sales summery are the same

Cash Sales

Examine the counterfoils of pay-in slips

-examine the counterfoils with reference to cash

sales summery

Routine checking:

-arithmetical accuracy of cash memos, cash

sales summery and gate keeper's goods
delivery summery
-ensure posting to correct accounting heads, in
particular , amount collected as sales tax to
sales tax amount

Vouching cash receipt from the

debtors
-Counterfoils of receipts
-auditor should enquire in to the system of
internal check
-people who is maintaining the debtor's ledger
should not be allowed to collect money from
the customers
-the customers should not handover cash
directly to the cashier
-verify the cash book

Vouching cash receipt from the

debtors
People who handle remittance should not take
part in the preparation and sending out of
statement of account to debtors

Vouching of receipts from bills

receivable

Receipt from bills discounted

- the amount received should be checked: cash

book, pass book and bills receivable book
-proper records in case of bills discounted
-determine the contingent liability in respect of
bills discounted

Receipts from bills matured

-cash received: comparing the bills receivable

book with the cash book and pass book

Vouching of receipts from bills

receivable
-matured but unpaid : dishonored, might have
been paid and the amount has been
misappropriated

Receipts from sale of investments

and building

Investment sold through brokers: contract note;

actual amount, commission
Check with related investment account and
stock market quotation
Investment and Dividend : apportion between
capital receipt and revenue receipt
Profit and loss on sale of investment is
properly adjusted
Broker note or auctioneer note

Receipts from sale of investments

and building

Capital profit: capital reserve account, not P&L

A/C

Vouching Cash Purchase

Cash memos, invoice, goods inward book

Discount

Voucher missing: duplicate copy

Goods paid for have actually been received

Purchase duly authorized

The amount paid is debited in the appropriate

account

Vouching Payable to Creditors

Vouched with the receipts issued by the

creditors
Amount due and goods received with the
invoices
Entries in goods inward book and stock
register
Vouchers have references of bill against which
payments are made

Verify periodical statements of accounts

No double payment for same supplies

Vouching of bills payable

Cash book and bills payable return

If paid through bank; examine bank pass
book
Bill payable paid and returned by the payees
are cancelled

Vouching of Payment for purchase

of fixed assets

Properly authorized
Documents relating to purchases and the
ownership
Documents examined by the solicitor
Invoices and receipts obtained from the
suppliers

Vouching of deferred revenue

expenditure

Non-recurring expenditure
Expected to be of financial benefit to several
accounting year
Preliminary expenditure, cost of issue of
shares and debentures, underwriting
commission, brokerage on issue of shares etc.
Auditors duty

-understand the nature of business

Vouching of deferred revenue

expenditure

Only exceptional revenue expenditure

Policies regarding writing off

verify the amount off portion

Vouching of preliminary expenses

Preliminary expenses is also called

promotional expenses
Incidental to the creation or flotation of a
company
Example: cost of printing memorandum of
association, articles of association, legal
expenses incurring in draft in the
memorandum, stamp duty, registration fee,
cost of company's seal

Vouching of preliminary expenses

Duties of auditor:

-only connected to the creation or flotation of the

company
-should not exceed the amount stated in the
prospectus
-not entirely debited to profit and loss account

Vouching cost of issue of share and

debentures

Provisions of companies act

Advise to the management to write off the cost

Write off amount is debited in the profit and

loss account
Not written off should be shown in the balance
sheet under the head miscellaneous
expenditures and losses

Vouching of underwriting
commission

Articles of association : underwriting

commission is authorized or not

Provisions of Companies Act

Not exceed the prescribed limit

Shown in the balance sheet under the head

miscellaneous expenditure
Contract has been filed with the registrar of
companies

Vouching of Purchase book

Contains only credit purchase

Also known as bought book or bought journals

Name of the creditor

Invoice in the of client and date

Authorized person

Not capital goods

Purchase book entry

Vouching of sales book

Credit sales

Evaluate the system of internal check

Not sales of capital goods

Compare with original record: sales invoice,

order received book, goods outward book etc
Discounts : unusually high or low

Vouching of bills receivable

Individual customer account in the subsidiary

ledger should be traced
Overdue must be discussed with the
management
Bills receivable should match with the total of
bills not matured on hand

Vouching bought ledger

A ledger contains the creditors account

Vouched with the help of Purchase register,
purchase return book, cash book and bills of
payable
Opening balance: audited previous year
balance sheet
Total schedule of creditors should agree with
the balance shown in the corresponding
creditor's ledger adjustment account in the
general account

Vouching bought ledger

Goods in transit must be recorded and the

amount of the party must be credited
If goods are not received, the amount paid in
advance may remain as a debit balance

Vouching Journal Proper

Entries which can not be passed through any

other of original or prime entry are passed to
journal proper
Auditor should check

-every entry has a narration

-the transaction has been authorized by a
responsible officer
-the transaction has been supported by
documentary evidence

Vouching Journal Proper

Opening entries: checked with reference to

previous year's audit
Closing entries: checked with reference to
audited closing balance of the general ledger
Transfer entries:one ledger to another ledger;
proper authorization; direct transfer should not
be made
Rectification entries: the details of actual
mistake;thoroughly checked with evidence ;
authorized by a responsible officer

Vouching Journal Proper

Adjusting entries: examine that entries are

relating to this period

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