Vouching of Income

Meaning
The act of examining vouchers is referred to as vouching. It is the practice followed in an audit, with the objective of establishing the authenticity of the transactions recorded in the primary books of account. It essentially consists of verifying a transaction recorded in the books of account with the relevant documentary evidence and the authority on the basis of which the entry has been made; also confirming that the amount mentioned in the voucher has been posted to an appropriate account which would disclose the nature of the Transaction on its inclusion in the final statements of account. On these considerations, the essential points to be borne in mind while examining a voucher are: (i) That the date of the voucher falls within the accounting period; (ii) That the voucher is made out in the clients name; (iii) That the voucher is duly authorised; (iv) That the voucher comprised all the relevant documents which could be expected to have been received or brought into existence on the transactions having been entered

DEFINATION
According to Dicksee, Vouching consists of comparing entries in the books of accounts with documentary evidence in support thereof.

Objectives of Vouching
The basic objectives of vouching are as follows: 1. To ensure that all the transactions are recorded properly in the books of accounts. 2. To see that all the entries of the transactions are supported by proper evidence. 3. To make it sure that fraudulent transaction Are not recorded in the books of accounts. 4. To see that all transactions relating to business are recorded in the books of accounts. 5. To see that the transactions are properly authenticated by a responsible person.

IMPORTANCE OF VOUCHING
Vouching is the essence of auditing. Success of an audit work depends upon the manner in which vouching is done. The auditor should check arithmetical accuracy of transaction as well as he should go through the sources of transactions.
Following points explain the importance of vouching: 1. Ensure genuineness of transactions: It enables to auditor to ascertain that the entries recorded are related to the transaction which have actually taken place. 2. Enables to know the nature of transactions: By checking the nature of transactions, the auditor can assure that whichever transaction are recorded are Not only genuine but also they relate to the nature and types of business, carried on by the particular organization. 3. Ascertain that transactions are pertaining to the accounting period: In the vouching the auditor can find whether the transactions are related to the current year or next year. 4. Facilitates proper allocation of capital and revenue expenditure: It helps to auditor to determine the proper allocation of capital and revenue expenditure and receipt. It ensures the auditor, such allocation is properly observed.

5. Detects frauds and errors: It helps to auditor to detect the existence of errors and frauds. To detect errors and frauds vouching is to be done with care and intelligence. 6. Decides authenticity of transactions: It ensures the auditor that the transactions recorded are duly authorized by some officials and they are completed in all respect. 7. Ensures proper accounting: Vouching helps to auditor to check that the accounting is done as per the known accounting principles or not. 8. Compliance with law: Vouching ensures that the transactions are agreeing with the provision of the law. 9. Ensure proper disclosure: Vouching enables the auditor to see that all the items are properly disclosed in financial statement of the organization.

Goods Sent on Consignment

1. See that consignment transaction are recorded in a separate journal maintained for the purpose 2. Check the transaction with proforma invoice for consignment 3. Check the entries in the cash book with the help of vouchers for expense , account sale , etc 4. Compare the entries in the consignment register with the account sale submitted by the consignee 5. Verify the valuation of goods lying with the consignee. see that it is valued at cost plus proportionate non-recurring expenses incurred 6. See that proper adjustments are made with the accounts for finding profit or loss correctly if the goods are sent at a higher price

Cash sales:The auditor should take the following steps to vouch cash sales:

1. Examine the system of internal check. 2. Tests check the salesman Daily Cash summary with the carbon copies of
cash memos and see that they are properly entered.

3. See that the daily cash sales as per Salesman abstract is properly entered on
the receipt side of cash book. If they are deposited into bank, check the same with counterfoil of Pay-in-slip books and Bank Pass Books.

4. See that the original is also attached to the Carbon copy, if any cash memo is
cancelled.

5. See that discount and allowances are properly allowed by a proper

authority.

6. Dates of cash memos and the dates on which receipts are recorded in the
cash book should be the same. Any difference should be enquired into.

7. Tests check the reconciliation between sales and stocks. 8. Tests check the posting from cash book into ledger. 9. Ensure that sale of fixed asset is not included in sales. 10. See that sales of scrap are recorded separately.

Rent received
1. Internal agreement : Examine the system of internal check 2. Lease agreement : Examine lease agreement with the tenants
to ascertain the total yearly rent receivable and see that its accordingly received

3. Rent register : Vouch the rent received with reference to carbon

copy of the rent receipt and rent register

4. Agents statement : Rent received/collected through agent

should be checked with carbon copy of receipt , agents statement , etc

5. Adjustment for rent receivable: See that rent

received in a advance is not credited to rent received account. See that proper adjustment entries are passed for rent receivable

6. Arrears: Investigate into all arrears of rent for a long time to avoid
the possibility of defalcation. The auditor should write to tenents to conform the arrears

7. Authority for bad debts : Write off of irrecoverable rent

is to be authorized

8. Entry : See that rent received is recorded in the cash book on the
same date

9. Provision for outstanding rent: See that a reasonable

provision for doubtful outstanding rent is made. Vouch the outstanding with reference to rent bills, and confirmatory letters from tenants and list of properties occupied

10. Disclosure : see that rent is disclosed separately

Sales returns
1. Internal check: Enquire into the system of internal check as
regards sales returns.

2. Entries in the book: Verify the entries in the sales return

book on the basis of the copies of the credit note and the entries in the stock register.

3. Sales returns of first and last month : Examine

the sales returns of the first and the last month of the year.

4. Credit note : See that the credit note are properly authorized
and checked by a component person

5. Costing and posting : See the casting and posting from

sales return register to ledger

6. Condition of returned goods : See whether the

returned goods are in good condition or they have become obsolete.

7. Genuiness: Examine carefully to decide genuineness of the

returns from sister concerns.