VOUCHING

Learning Outcomes
• Identify vouching process of assets and
liabilities
• Identify vouching process of expenses and
incomes
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 Vouching
• Vouching is defined as the "verification of entries in the
books of account by examination of documentary
evidence or vouchers, such as invoices, debit and credit
notes, statements, receipts, etc.

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 1. Vouching of Assets
Documents to be vouched

•Title deed
•Mortgage deed in case of mortgage property
•Contract
•Receipts
•Fixed assets register
•Minutes of director’s meeting
•Hire purchase agreement
•Bank Statement

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 2. Vouching of Liabilities
Documents to be vouched

•Certificates for bank loans

•Minutes of the board meeting
•Bank statement
•Letter of loan sanction
•Bank pass book
•Purchase invoice
•Copies of challans from supplier
•Goods inward register
•Stock register

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 3. Vouching of Incomes
Documents to be vouched

•Sales invoices
•Sales register/Goods outward register
•Stock records
•Purchase orders from customers
•Consignment day book
•Receipts issued to customers
•Customer’s account statements
•Existing and past discount charts

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 4. Vouching of Expenditures
Documents to be vouched

•Purchase invoices
•Copies of orders placed
•Goods received note
•Stock records
•Salary bills
•Wage sheets
•Appointment letters
•Employment registers
•Service agreement
•Annual Budget

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 5. Vouching of Cash Transactions

• Opening Balance of Cash Book

• Cash Received from Debtors

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 6. Repayment of Loan
Repayment of loan by others may be verified in the following ways −

•Calculation of interest received and interest should be credited to

interest received account.
•Verification from bank statement if directly deposited by party into
bank.
•Checking of carbon copies or counterfoils of cash receipts.
•To ensure that there should be no violation of Income Tax rules as
payment of loan exceeding Rs. 20,000/- cannot be repaid in cash. It
should be through Cheques, Demand Draft, NEFT, RTGS or any other
available banking channels.

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 7. Rent Received
• To check rental agreement or lease deed.
• In case where the rental income is received from more
than one property, separate account for each property
should be maintained.
• The Auditor should verify that the rent for all the twelve
month is received or not.
• The amount of rent should be verified from the rent deed
or the lease deed.
• If TDS (Tax Deducted at Source) is deducted by the
party, there should be proper accounting of TDS.

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 8. Sale of Investments
• To check bank statement if the sales proceeds have
reached the bank account.
• To verify broker commission, note or debit note, if
investments are sold through broker.
• To ensure separate accounting is being done for capital
receipts and revenue receipts.
• Dividend or profit or loss on sale of investment is a
revenue receipt and the sales proceeds of the
investment cost should be booked as capital receipt.

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 9. Sale of Fixed Assets
• To check minutes of the meetings of Board of Directors.

• Sale agreement or sale contract.

• Verification of agent account if sale is made through an agent.

• Profit or Loss on sale of fixed assets should be booked to revenue

account.
• Authorization of sale of fixed assets.

• Sale proceed of fixed assets should be credited to fixed assets

account after deducting expenses on sale of fixed assets.

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 10. Payment to Creditors

• Payment to creditors may be examined by the receipt

issued by the creditors.
• If the creditor is paid amount as full and final settlement,
the balance amount, if any stands in the ledger account
of the creditor; this amount should be credited to
discount received.
• If any advance payment is made to creditor that should
be clearly mention.
• Statement of account of creditor.

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 11. Payment of Salaries

• Attendance record of employee and salary register.

• Appointment letter of new employees.
• Comparison of current month salary with last month’s
salary and if there is any abnormal change in amount,
Auditor should verify the same.
• Alteration in amount of deductions on account of
advance, loan, fine, funds, insurance, TDS, etc.

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 12. Purchase of Plant and
Machinery
The Auditor should pay attention to the following −
•Purchase invoice of machinery.
•Freight inward charges, installation charges, erection and
commissioning charges should be capitalized.
•Treatment of Excise duty according to the excise rules.

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 13. Purchase of Land & Building
Purchase of Land and Building can be vouched as follows −

•Study of Lease hold agreement, if land is purchased on lease hold

basis.
•Payment should be as per lease term.
•All the expenses incurred to acquire lease hold property should be
debited to respective property account.
•Auditor should study the conveyance deeds in case property is
purchased under free hold basis.
•For verification of payment, the Auditor can check the payment receipt
and the conveyance deed.

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 14. Rent Paid
Consider the following points for the verification of rent by
the auditor −

•Rent Deed.
•Rent receipt from Land lord.
•Provision for un-paid rent at the end of the year.

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 15. Credit Purchases
The Auditor has to check and verify the following −

•Record of all purchase orders.

•Verification of quantity, price and payment terms of purchase invoice
with purchase orders.
•Verification about whether goods actually received.
•Verification about proper recording of purchase bill in purchase book.
•Goods purchase should be for business purpose only, not for any
personal use of any partner, director or officer of the company.
•The Auditor should verify the statements of accounts of suppliers.

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 16. Purchase Return Book

The Auditor needs to verify the following points −

•A debit note or purchase return invoice should be prepared
mentioning the original purchase invoice number, quantity,
price, applicable taxes, etc. These should be according to
the original purchase invoice against which material was
purchased.
•A corresponding credit note should be received from the
supplier.
•Separate goods return book should be maintained.
•Adjustment of the amount of goods return invoice should
be done while making payments to the supplier.
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 17. Cash Purchase
• Auditor should compare the cash memos with goods
received notes.
• Cash memos should also be compared with the goods
inward book.

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 18. Cash Sales

• VOUCHING OF CASH SALES : Cash sales can be vouched by the

auditor in the following way :
• Internal Check : Auditor should evaluate the internal check and if it
is proper system then he should rely on it.
• Checking Of Memos : Auditor should check the cash sales memos
and compare it with the daily summaries of salesman and cashier.
• Entry In Cash Book : Auditor should also check the figures of the
salesman and cashier summaries entry in the cash book.

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 Contd..
• Checking Of Cash Register : If cash register is used,
auditor should check the total daily rolls with the entries
in the cash book.
• Checking Of Cash Book : Auditor should compare the
cash book with the general ledger.
• Checking Of Price Lists : Auditor should obtain and
verify it price lists and other instructions by the authorize
persons regarding the cash sales.

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 mcq
• Voucher relates to…
(a)Cash receipt
(b)Cash payment
(c)Credit transactions
(d)All the above

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 ans
• Voucher relates to…
(a)Cash receipt
(b)Cash payment
(c)Credit transactions
(d)All the above

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• Which among the following is not a
function of the auditor
• a. Checking errors and frauds
• b. Vouching with original documents
• c. Preparing final Accounts

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• c. Preparing final Accounts

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• While verifying recovery of bad debts, the auditor has to check
• a) Whether the amount was actually written off in some previous
year
• b) The source of income of the debtor
• c) That the debtor has returned the entire amount written off.
• d) All of the above.

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• a) Whether the amount was actually written off in some
previous year

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 MCQ
• Checking the date of voucher on the voucher during vouching mainly helps
the auditor to obtain evidence that.

• (a) The transaction relates to current year.

• b) The transaction has taken place.
• (c) The transaction is genuine.
• d) The transaction is legal.

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• (a) The transaction relates to current year.

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