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Vouching of Cash Transactions

How to vouch for various cash receipts 

Receipt side

1. Cash sales:

In vouching for cash sales, the cash register should be fully checked with carbon copies of cash memos. Then, the auditor should verify the daily deposits of cash received in the bank dates of the cash and the date on which the receipts are recorded in the cash book must be the same.

Where the cash memos are cancelled, all copies including the original copy duly cancelled should be kept in the book. Where a company has a discount policy, if more discount is allowed in a transaction it must be approved by a responsible officer.

2. Cash received from the debtors:

The auditor should verify the amount received from debtors from the counterfoils or carbon copies of the receipt issued to the customers. All these receipts should be serially numbered. The amount should be entered in the cash book on the day when received. Discount allowed to customers should be authorized by a responsible officer.

Sometimes correspondence made with the customer can also be verified.

3. Loans:

While vouching the loans received, the terms and the conditions contained in the agreement should be verified. If the loan is secured what security has been offered, whether the fact has been disclosed in the balance sheet.

4. Bills receivable:

Bills receivable book may be verified because the various details regarding the bills matured and discounted are available in it. The auditor should check the amount received with the bank statement. Some bills might have become due but no amount has been received. Whether the entry for the dishonour of such bill has been made.

Verification of the bills discounted should be made. Whether entry for a discount has been made. Such bills should appear as a contingent liability in the balance sheet; if the date of maturity is after the date of the balance sheet.

5. Sale of Investment:

If the sales have been effected through a bank, the auditor should examine the bank advice to know the various details. Sometimes the investment is sold through the broker. Broker’s sold note or commission should be examined to verify the sale proceeds and commission charged by the broker.

If the investments are sold at cum-dividend price, the auditor should see that proper apportionment has been made between capital receipts and revenue receipts.

Sometimes the investments are made against specified funds. Profit or loss on sale of such investments must be transferred to such funds account.

6. Sale of Fixed Assets:

Sale of fixed assets may be vouched with a minute book of board of directors, correspondence, agents’ sale account and sale contract. It should be seen that the proper account has been credited. Any profit arising on the sale of assets shall be credited to a revenue account that is not available for the distribution of dividends. If any expense on the sale of assets is paid, the sale proceeds of the asset should be reduced by such amount and the balance should be credited to the asset account. It must be seen that the sale of fixed assets has been sanctioned by the authorized person or committee.

Payment side  

1. Cash Purchases:

Goods purchased are actually received by the storekeeper. Cash memos can be compared with goods inward book to verify the goods received. Only the net amount (after trade discount) should be entered in the books.

2. Payment to creditors:

Should be examined with the receipts issued by the creditors. The receipts should indicate the purpose for which the payment has been made. If the payment is made in full and final settlement of the account, the balance should be accounted for as a discount received. Where the payment is made in excess of the bill, either the excess payment is in advance or the payment is made by mistake, which should be recovered back from the creditor.

3. Bills payable:

Bills payable honoured on the date of maturity and is returned by the payee after receiving the payment. These bills should be cancelled after being paid. Bills payable can be vouched with bills book. If the payment is made by the bank, a bank statement or passbook can be examined to verify the payment of the bill.

4. Wages:

Wages paid and calculated for various months should be compared. If the wages of a particular month differ from the preceding month, the auditor should look into the reasons for the difference. Random checking of wages calculations should be made. The auditor should see the proper record is maintained for unpaid wages, deductions for any advance taken by the worker should also be verified, and deductions made from the wages should also be entered in the proper account. Special attention should be given to the payments made to casual workers.

5. Payment Of Salaries:

In vouching for the payment of salaries following points are important

  • a. The auditor should check the salary register with the entries made in the cash book

  • b. He should examine carefully alterations in the number of deductions on account of fines, funds, loans, insurance etc.

 

6. Purchase of Investment:

The auditor should compare the investment purchased with Broker’s Bought Note. If possible, physical verification of investments should be made. Investments must be in the name of the company. Where the investments are purchased at cum-interested price, interest included in the purchase price should be debited in the interest account and the balance in the investment account. Later on, when the interest is received on the investment, it should be credited to the interest account.

7. Rent paid:

The auditor should verify the payment of rent from the agreement. The ret voucher should be supported by a rent receipt from the landlord. It should be seen that payment of rent is sanctioned by the responsible officer.

8. Loans:

The auditor should be that the loan voucher should be supported by the receipt given by the party. Further details regarding the terms and condition of the loan can be verified from the loan agreement. It should be seen that the instalment of the loan along with interest is received in time. Mortgage Deeds and other documents should also be examined.

9. Interest on Loan:

The auditor should verify that the rate of interest on the loan does not differ from the terms and conditions of the loan agreement. Debenture interest can be verified from the debenture interest book. All the payments of interest must be supported by vouchers and receipts.
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