Auditing Vouching of Ledger – Learn Auditing in simple and easy steps starting from Following steps are involved in the audit of impersonal ledger account −. this post explains about impersonal ledger and its auditing. The auditor’s duty is to inspect the relevant accounts in the ledger, demand notes, receipts, etc., and find out what period is covered.
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Auditing – Vouching of Ledger
All such expenses should be charged to the current year’s Profit and Loss Account and shown as a liability in the Balance Sheet. The auditor should note that management has created reasonable amount Of provision for dispute. The tax case may be pending with tax department. The auditor should check amount of such liability.
The debit part in the in the journal goes into the debit side of the ledger and the credit part goes into the credit side of the ledger. It is, therefore, necessary that all the expenses which have been incurred during the current year must be debited to Profit and Loss Account and shown as a liability in the Balance Sheet.
The entry for tax payable can be examined. Commission on sale is payable to agent, director or salesmen on the basis of sales.
The purchase ledger may be kept under self-balances system. Examples of such expenditures are heavy expenses on special advertisement campaign for introducing a new product, research and development expenditure, heavy expenditure on repairs imperspnal machinery, discount allowed on issue of shares, etc. He should see that the provision for interest payable should be duly provided in the books of accounts according to the applicable rate of interest.
These expenses are paid in advance for next coming year shence should not be debited to profit and loss account of current year to arrive at true financial results. We will now study the vouching of items which appear in the impersonal ledger and relate to Profit and Loss Account. An auditor has to check whether it is recorded on the basis of evidence or not.
Impersonal Ledger | MUDRANKA
Such liability is to be stated in footnotes. Such accounts are transferred from ledgers.
The process of ascertaining the balance of a particular account on a given date is called Balancing an Account. Transporters normally provide bills for transportation charges after closing of financial year. Prepaid insurance will be shown as prepaid expenses under the head of current assets in the balance sheet. Failure to do so will inflate the profit for the current year. He can see the rent agreement to note the time period.
Such dividend is to be disclosed in footnotes for information. For example, if Rs. When business is small one ledger is sufficient to keep a record of personal and impersonal accounts. Facts may be collected about disputed amount. The auditor should himself scrutinize various nominal accounts like wages and salaries, rent interest, discount, taxes, etc.
The auditor should check various adjustment entries made at the end of the year when final accounts are prepared. A contingent asset is one that is not business asset at present. On the other hand, it is spread over the number of years during which the benefit is likely to be enjoyed and only a proportionate amount is debited to the Profit and Loss Account. Since rent for the month of December, relates to the accounting yearit must be debited to the Profit and 1 Loss Account and shown as a liability in the Balance Sheet.
For example; Insurance of Fixed assets is normally paid on annual basis and if we paid insurance premium in the month of October for one year, then insurance for this current year will be calculated from October to March and from April to September it will be treated as prepaid insurance. The auditor can vouch cash paid with receipt of seller, cash journal entry and posting in purchase ledgers. December last, he can presume that it ;,was outstanding at the close of the year.
The auditor can vouch goods returned recorded in purchases return journal. Ledger is a book or place where classified, a record is maintained, The transactions relating to an account are posted from journals.
The adjusting entry can be checked to see that exact amount is recorded. The auditor should bad debts account in detail. The sales ledger may be kept on self balances system.
The auditor should check overdue accounts of debtors. When the company will win the case it will become asset.