Vouching of Trading Transactions
Unit 2
Coverage
• Vouching of cash transactions
– Receipts
– Payments
Vouching of cash receipts
• Opening Balance of Cash Book
- Opening balance of cash book represents cash in hand at the start of the year and
should verified from the balance sheet of last financial year.
• Cash Received from Debtors
- Consider the following points for verification of cash received from debtors −
- The carbon copies or counterfoils of cash receipt book should be verified.
- Cash receipt should be serially numbered.
- Cash received should be entered on the same date when the cash is actually received.
- The discount allowed to customers should be properly authorized by a responsible officer.
- Correspondence with customer and ledger account should be tallied.
- Following are the different ways used for misappropriation of cash −
- Cash received from customer not recorded in books and no cash receipt may be issued.
- Issuance of receipt for lesser amounts than amount actually received.
- Using teeming and lading method; it is a very common method to misappropriate the money,
in which the cash received from any customer not recorded in the books and the cash
received from same customer at a later instance or another customer recorded in the books
and so on
• Repayment of Loan by Others 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.
• 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.
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.
Subscription Subscriptions are received from the members of a club
and the following points need to be considered by the Auditor while
vouching subscription −
- Subscription register should be verified.
- Verification of subscription received during the year and the
subscription receivable.
- Counterfoil of cash receipt should be verified.
Sale of Fixed Assets
- To check minutes of the meetings of the 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 if any.
Interest and Dividend Received
- Verification of the dividend warrant letter along with the covering letter for
verification of dividends in case of dividends received through cheque.
- Verification of bank statement, if the dividend is directly credited to the bank
account.
- Interest on security can be vouched from the securities schedule.
- Interest on fixed deposit can be verified from bank statement and TDS
certificates.
- Interest received from outsiders to whom company has granted loan could be
verified from statement of account of party along with TDS certificates.
- Provision should be made for interest accrued but not due.
- All interest received and accrued should be properly accounted for in the
books of accounts.