Page 185 - DCOM204_AUDITING_THEORY

Unit 9: Vouching

Journal Notes

All those entries which cannot be passed through any other book of prime entry are
passed through the Journal. The following transactions are usually passed through the
Journal:
1. Opening Entries.

2. The acquisition of different assets or liabilities taken over forms the vendors.
3. The issue and allotment of shares.
4. Forfeiture of shares.

5. Adjusting entries.
6. Closing entries.

7. Entries relating to consignments.
8. Entries relating to dishonor of bills, etc.
The auditor should pay attention to the transactions passed through the journal. While
vouching the entries in the journal, the auditor should see that
1. the transaction has been properly authorized;

2. the transaction is within the power of the company; and
3. the transaction is supported by documentary evidences.
The auditor should not pass any entry in the journal until he is quite satisfied with regard
to its validity and correctness.

Bought Ledger

The auditor should now proceed to check the bought ledger, i.e., the ledger which
contains the creditor’s accounts. The opening balance of different accounts in the bought
ledger should be checked with the previous year’s audited balance sheet or the schedule
of creditors duly checked by the previous auditor. The ledger can be vouched with the
help of the audited balance sheet of the previous year. Purchase Journal, Purchase
Returns Book, cash Book, Journal, Allowance Book, Bills Payable Book etc. The casting
of the accounts in the Bought ledger should now be checked with the balance as shown in
the schedule of creditors which has been supplied to him by the client. If the books are
maintained on ‘Self-balancing system’, the total of the balance shown in the ‘creditors
Ledger Adjustment Account’ in the General Ledger should agree with the total of the
schedule of creditors.

Sales Ledger

Having checked the bought ledger, the auditor should now proceed to check the sales ledger,
i.e., the ledger which contains the accounts of the debtors. The opening debit balances will be
checked from the previous audited balance sheet or the schedule of debtors duly checked by the
previous auditor. The accounts in this ledger will be checked from the previous audited balance
sheet and subsidiary books, such as Sales journal, Sales Return Book, Cash Book, Journal,
Allowance Book, Bills Receivable Book, etc. For the Purpose of valuation of debts, he should ask

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