ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING

PROCESS

FINAL DRAFT SUBMITTED IN THE PARTIAL FULFILLMENT OF THE

COURSE TITLED

PRINCIPLES OF ACCOUNTING & AUDIT

SUBMITTED TO SUBMITTED BY

MR. ASHOK KUMAR SHARMA NAME- RISHABH GUPTA

ASSISTANT PROFESSOR COURSE- BBA.,LLB(HONS.)

SEMESTER – 2ND

ROLL NO.-2250

CHANAKYA NATIONAL LAW UNIVERSITY

NYAYA NAGAR, MITHAPUR, PATNA-800001

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

DECLARATION BY THE CANDIDATE

I, RISHABH GUPTA, student of Chanakya National Law University hereby declare that the
work reported in the B.B.A.LL.B. (HONS.) project report entitled: “ROLE OF VOUCHER
FOR PREPARATION OF ACCOUNTING PROCESS” submitted at Chanakya National
Law University, Patna is an authentic record of my work carried out under the supervision of Mr,
Ashok Kumar Sharma, I have not submitted this work elsewhere for any other degree or
diploma. I am responsible for the contents of my Project Report.

(Signature of the Candidate)

NAME: RISHABH GUPTA

ROLL NO: 2250

COURSE: B.B.A., LL.B. (Hons.)

SEMESTER: 2nd

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

ACKNOWLEDGEMENT

I would like to thank my faculty Mr. Ashok Kumar Sharma whose guidance helped me a lot with
structuring of my project. I take this opportunity to express my deep sense of gratitude for his
guidance and encouragement which sustained my efforts on all stages of this project.

I owe the present accomplishment of my project to my friends, who helped me immensely with
materials throughout the project and without whom I couldn’t have completed it in the present
way.

I would also like to extend my gratitude to my parents and all those unseen hands that helped me
out at every stage of my project.
THANK YOU

NAME: RISHABH GUPTA

ROLL NO: 2250
COURSE: B.B.A., LL.B. (Hons.)
SEMESTER: 2nd

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

TABLE OF CONTENTS

DECLARATION BY THE CANDIDATE .................................................................................... 2

ACKNOWLEDGEMENT .............................................................................................................. 3

TABLE OF CONTENTS ................................................................................................................ 4

RESEARCH METHODOLOGY.................................................................................................... 5

AIMS AND OBJECTIVE........................................................................................................... 5

HYPOTHESIS ............................................................................................................................ 5
RESEARCH METHODOLOGY................................................................................................ 5
SOURCES OF DATA ................................................................................................................ 5
RESEARCH QUESTION ........................................................................................................... 5
CHAPTER 1: INTRODUCTION ................................................................................................... 6

DEFINITION OF VOUCHER ................................................................................................... 6

PREPARATION OF ACCOUNTING VOUCHERS ................................................................. 7
ROLE OF VOUCHER ................................................................................................................ 7
CHAPTER 2: TYPES OF VOUCHER......................................................................................... 10

DEBIT VOUCHER .................................................................................................................. 10

CREDIT VOUCHER ................................................................................................................ 11
TRANSFER VOUCHERS ....................................................................................................... 12
COMPLEX VOUCHER ........................................................................................................... 13
CHAPTER 3: LEGAL IMPLICATION ....................................................................................... 15

CHAPTER 4: PRATICAL APPLICATION AND ANALYSIS .................................................. 16

SOLE PROPRIETORSHIP ...................................................................................................... 16

PARTNERSHIP ........................................................................................................................ 16
PRIVATE COMPANY ............................................................................................................. 17
PUBLIC COMPANY ............................................................................................................... 17

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

RESEARCH METHODOLOGY

AIMS AND OBJECTIVE

The researcher aims to fulfill below objectives through this project:

➢ The main aim of this project is to study about the vouchers.

➢ To study about the role of voucher for preparation of accounting process.

HYPOTHESIS

The researcher hypothesise that Vouchers are the most important documents for accounting and
any scam and fraudulent act by any person can be scrutinised by these vouchers.

RESEARCH METHODOLOGY

The researcher will be relying on Doctrinal method of research to complete the project.

SOURCES OF DATA

The researcher aims to conduct his research obtaining resource material from Doctrinal sources
of data. However, wherever necessary Non Doctrinal Sources of data would also be taken into
consideration.

RESEARCH QUESTION

➢ What is a voucher?
➢ What is accounting process?
➢ What is voucher’s role?
➢ How it helps in preventing frauds?

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

CHAPTER 1: INTRODUCTION

Accounting process begins with the origin of business transactions and it is followed by analysis
of such transactions. A business transaction is a transaction, which involves exchange of values
between two parties. Every transaction involves Give and Take aspect. The debit represents Take
aspect and credit represents the Give aspect in a transaction. For example, when a computer is
purchased for office use for cash, then the delivery of computer represents Take aspect and
payment of cash represents Give aspect. Thus, business transactions are exchange of goods or
services between two parties and effects of these transactions are recorded in two accounts.

DEFINITION OF VOUCHER

Voucher is a piece of evidence, which proves that a certain event or transaction is carried out.
Vouchers are necessary because they are a source document and a proof to every transaction that
has taken place in the business premises. If every transaction of the business were recorded, it
would mean that there is a voucher available as a proof to that transaction. When the accounts of
the company are audited, these vouchers play an important role and help the external auditor in
gathering audit evidence.

A voucher may be of different kinds like Cash payment/receipt voucher, Bank payment/receipt
voucher and petty cash voucher all these vouchers if made by hand or printed from a
computerized accounting system will serve as an evidence of transaction as they will be signed
by payer and receiver. A voucher can also be used as an internal control tool if it has to verify by
different personnel before final transaction. Another form of voucher is Journal voucher these are
used to make adjustments in accounts. These adjustment are passed during the year or as soon as
they are required to pass a journal entry.

Business transactions are usually evidenced by an appropriate documents such as Cash memo,
Invoice, Sales bill, Pay-in-slip, Cheque, Salary slip, etc. A document which provides evidence of
the transactions is called the Source Document or a Voucher. At times, there may be no
documentary for certain items as in case of petty expenses. In such case voucher may be
prepared showing the necessary details and got approved by appropriate authority within the
firm. All such documents (vouchers) are arranged in chronological order and are serially

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

numbered and kept in a separate file. All recording in books of account is done on the basis of
vouchers.

PREPARATION OF ACCOUNTING VOUCHERS

Accounting vouchers may be classified as cash vouchers, debit vouchers, credit vouchers,
journal vouchers, etc. There is no set format of accounting vouchers. A specimen of a simple
transaction voucher is used in practice is shown in figure below. These must be preserved in any
case till the audit of the accounts and tax assessments for the relevant period are completed. Now
a days, accounting is computerised and the necessary accounting vouchers showing the code
number and name of the accounts to be debited and credited are prepared for the purpose of
necessary recording of transactions. A transaction with one debit and one credit is a simple
transaction and the accounting vouchers prepared for such transaction is known as Transaction
Voucher. Voucher which records a transaction which entails multiple debits/credit and one
credit/debit is called compound voucher. While transactions which have multiple debits and
multiple credits are called complex voucher. These types of voucher with their specimen is dealt
with in more detail in the second chapter of this project.

The point to be noted down here is since there is no fixed rule regarding any format of voucher
and a mere essentials that must be present in a voucher are to be given and therefore each
business authority has its own discretion in using any sort of Voucher.

ROLE OF VOUCHER

The accounting process starts itself with the happening of a certain event and the very next step
in this process in creation of voucher and without this step no further steps can be taken in the
process of accounting. The design of the accounting vouchers depends upon the nature,
requirement and convenience of the business. There is no set format of an accounting voucher.
To distinguish various vouchers, different colour papers and different fonts of printing are used.
Some of the specimen of the accounting vouchers are given in the earlier pages. An accounting
voucher must contain the following essential elements:
• It is written on a good quality paper;
• Name of the firm must be printed on the top;

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

• Date of transaction is filled up against the date and not the date of recording of
transaction is to be mentioned;
• The number of the voucher is to be in a serial order;
• Name of the account to be debited or credited is mentioned;
• Debit and credit amount is to be written in figures against the amount;
• Description of the transaction is to be given account wise;
• The person who prepares the voucher must mention his name along with signature; and
• The name and signature of the authorised person are mentioned on the voucher.1

WHAT’S IN A VOUCHER

The detailed information contained in a voucher includes the payee's or vendor's name, the
invoice date, the monetary amount and the due date of payment, details of the transaction, the
accounts or account codes to be debited and credited in the accounting books, and other relevant
information. The voucher is also serially numbered to facilitate control.
1
Accountancy for Class 11 by NCERT
2
Source: - https://www.meritnation.com/cbse-class-11-commerce/accountancy/financial-accounting-part-i-ncert-
solutions/recording-of-transactions-i/ncert-solutions/161_17_1348_2365_87_14166

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

Upon verification, the voucher is submitted to an authorized official for approval. Once
approved, the voucher is recorded in the voucher register. The voucher register takes the place of
the purchases journal. The journal entry in the voucher register often includes a debit to an asset
and an expense or purchases account, with a corresponding credit to vouchers payable or
accounts payable.

EXAMPLE OF VOUCHER

A local restaurant orders meat and fish every few days from its vendors. The restaurant manager
fills out a purchase order for 30 pounds of meat, and the owner initials the purchase order to
approve the shipment. When the shipment is received, the contents of the shipment are compared
with the purchase order to ensure that the shipment matches what was ordered. The restaurant
completes a shipping receipt to document the process, and the shipping receipt is compared with
the vendor’s invoice.
The voucher, which is a cover page that explains the attached documents, includes the purchase
order, shipping receipt, and the invoice. The purchase amount is added and recorded to accounts
payable on the balance sheet until paid. The owner reviews all the voucher information before
signing a check.
The voucher also includes the general ledger accounts used to record the transaction. The
restaurant, for example, can credit (increase) the meat inventory account and debit (decrease) the
cash account to record the payment. The receipt of payment and the date is recorded to show that
the voucher has been paid. Accounts payable will reflect the lower balance due to the invoice
being paid, assuming there are no additional payables generated.

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

CHAPTER 2: TYPES OF VOUCHER

Accounting voucher may be classified as Cash voucher i.e., debit voucher, credit voucher, and
non-cash voucher i.e., transfer voucher.

DEBIT VOUCHER

These vouchers are prepared for recording of transactions involving cash payments only. Cash
payments in the business are made on account of: -
• Expenses
• Purchases of Goods
• Purchases of Assets
• Payment to creditors
• Repayment of loans
• Drawings and advances etc.

All cash payments, one aspect is cash and the other is either the party to whom the payment is
made, or an expense or an item of property for which the payment is made. A format of debit
voucher is as follows:

3
Source: - http://download.nos.org/srsec320newE/320EL4.pdf

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

CREDIT VOUCHER

These vouchers are prepared for recording of transactions involving cash receipts only. Cash
receipts in the business are accepted on account of:

1) Cash sales of goods

2) Cash sales of assets

3) Revenue income like interest, rent, etc. received in cash

4) Cash receipts from debtors.

5) Loan taken

6) Cash withdrawn from bank

7) Receipts of advances, etc.

In all cash receipts, one aspect is cash and the other is either person or party from whom cash is
received or revenue on account of which cash is received or the property on sale of which cash is
received. A format of credit voucher is as follows:

4
Accountancy for Class 11th; NCERT

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

TRANSFER VOUCHERS

With the expansion of business, the role of credit transactions is increasing at a fast pace. For
recording of these credit transactions, a voucher is prepared known as transfer voucher. These
transfer vouchers are prepared to record non-cash transactions of the business involving:

1. Credit purchases

2. Credit sales

3. Return of goods sold

4. Return of goods purchased on credit

5. Depreciation on Assets

6. Bad Debts etc.

These vouchers are prepared both in debit and credit forms simultaneously.

5
Accountancy for Class 11th; NCERT .

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

COMPLEX VOUCHER

Transactions with multiple debits and multiple credits are called complex transactions and the
accounting voucher prepared for such transaction is known as complex voucher/ journal voucher.

6
Accountancy for Class 11th; NCERT.
7
Accountancy for Class 11th; NCERT.

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

All these above mentioned Vouchers are an important source documents by the help of which
any business entity can go forth with recording these transaction in the books of account in the
books of original entry that are Journal and Day books.

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CHAPTER 3: LEGAL IMPLICATION

All through as we can report there is no specific laws regarding the format of voucher but there
are certain guidelines that are to be followed for the very purpose of uniformity and bringing
legality in the maintenance of Vouchers and Source Documents. These guidelines are as follow:

• All vouchers should be scrutinized thoroughly before making payments.

• All vouchers should be scrolled (serial numbered) and entered in cash/bank book with
appropriate referencing.

• All vouchers to be supported with appropriate documentary evidence and necessary

approval from competent authority needs to be taken beforehand.

• Supporting documents should be cross referenced to link them to each item of

expenditure with budget heads, project components, expenditure categories etc.

• All supporting documents in originals should be defaced/ stamped as ‘PAID &

CANCELLED’ with details of cheque number and date.

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 ROLE OF VOUCHER FOR PREPARATION OF ACCOUNTING PROCESS

CHAPTER 4: PRATICAL APPLICATION AND ANALYSIS

Voucher files should be used for all company expenditures from inventory purchases to monthly
utility bills. Let’s look at inventory purchases as an example.

When a piece of inventory is set to be ordered, the merchandising or inventory department files a
purchase requisition with the purchasing department. The purchasing department places an order
for the inventory and puts both the purchase requisition document and the purchase order in the
voucher file.

The voucher file is sent to the shipping and receiving department, which receives the shipment,
files a receiving report, and places the report in the file. The voucher is then sent to the
accounting department with the invoice. After the accounting department approves the invoice,
all the source documents are placed in the voucher file and sent to the cashier for payment.

As you can see, the voucher file stores every source document involved in the purchase of the
inventory, so management can trace the audit trail of every inventory purchase and stop
unauthorized cash disbursements.

SOLE PROPRIETORSHIP

As an Individual the relevance of vouchers is not as much in legal domain as it is in personal domain.
We ourselves know that we keep records of our transaction through certain source documents,
similarly when a sole proprietor has to keep certain records it keeps with himself certain source
documents like cash memo, invoice, bills of receipt and payments. Since the Sole proprietors don’t
have to submit their financial statements of business, they are not compellable to maintain this
vouchers but since they have to file income tax based on the same business income, they are liable to
put forth certain valid records of transaction so as to validate this amount of income generation that
they wish to show in Income Tax department.

PARTNERSHIP

In partnership also the financial statements of the business are not to be submitted in forum barring
certain exemptions and in cases where certain financial instruments or government aid is to be
availed. Despite that the validity and relevance of source documents and voucher is inevitable as not
only these transaction validate the business transaction but also provide for legal backing in case any

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dispute arises between partners and in situation of any civil suit or at times of resolution of
partnership. Most of the modern partnership companies not only appoint a CA but also follow all the
norms to maintain a scientific and legally correct record of business transactions. Therefore, the
importance of Vouchers and Source Documents are inevitable.

PRIVATE COMPANY

Private Companies maintain their records of financial transaction as per the Companies Act, 2013
and therefore have to follow all the legal provision as laid down by the act. The importance and
relevancy of the vouchers becomes inevitable in this case. Not only these companies are under the
ambit and scope of external audit but also, they have to submit their annual reports to the Registrar of
Companies and therefore as per the present guidelines they have to maintain the report of financial
statements for 8 years therefore they must have the records of previous 8 years of transactions.

PUBLIC COMPANY

Public Companies maintain their records of financial transaction as per the Companies Act, 2013 and
therefore have to follow all the legal provision as laid down by the act. The importance and relevancy
of the vouchers becomes inevitable in this case. Not only these companies are under the ambit and
scope of external audit but also, they have to submit their annual reports to the Registrar of
Companies and therefore as per the present guidelines they have to maintain the report of financial
statements for 8 years therefore they must have the records of previous 8 years of transactions.
Moreover, they have to publish their reports for all the stake holders of the company. The importance
of Voucher and source document is such that in recent past most of the scams are unveiled as a result
of rechecking and scrutiny of these source documents only. The source documents therefore are not
only the source from which the transactions are to be recorded and backed but also the source of
manipulations. If the source document is manipulated, then the whole recording becomes
questionable therefore a careful observation and scrutiny is required in matters of Vouchers and the
general principles like chronological order maintenance and systematic recording must be followed.
Further they must check as to whether they are consonance with the legal aspect of accounting or not.

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CHAPTER 5: CONCLUSION

In this project report we came to the conclusion that role of Voucher is of utmost importance for
the whole system of accounting process.

The very process of accounting starts with the happening of a business transaction and event and
the documents that verifies this happening is called the source documents and to record this
transaction in the books of accounting we need vouchers to be prepared and therefore the role of
Voucher can be understood in this light.

Further as per companies act and various other guidelines given by the Government and its
statutory bodies the record for at least 8 years need to be maintained so that in cases when we
have to look back to certain transaction in case of any scams.

The importance of Vouchers can be also ascertained by the fact that manipulation of the
Vouchers may lead to the manipulation of the whole accounting process and the very basic point
of feature of accounting record that is reliability is defeated.

Moreover, in any auditing the Vouchers plays the most important role as not only they contain
vital information but also are prone to manipulation.

The hypothesis that researcher presumed stands true through this report.

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BIBLIOGRAPHY

BOOKS

• Financial accounting By T.S. Grewal

• Accountancy for standard 11 by NCERT

• Study Material By ICAI

WEBSITES

• https://www.readyratios.com/reference/business/voucher.html/

• https://scholar.google.co.in/scholar?hl=en&as_sdt=0%2C5&q=voucher+in+accounting&
btnG/
• https://cleartax.in/s/maintenance-books-accounts/

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