Vouching of Bought Ledger or Creditor’s Ledger | Guidelines to Auditor

Vouching of Bought Ledger or Creditors’ Ledger – Audit Procedure & Guidelines

Bought Ledger consists of creditors’ accounts. An auditor should check the opening balance of different accounts in the Bought Ledger with the previous year’s audited Balance Sheet or the Schedule of the creditors duly checked by the previous auditor.

Vouching of Bought Ledger or Creditors ledger

Vouching of Bought Ledger or Creditors ledger

Bought ledger should be vouched with the help of the previous year’s audited Balance Sheet and all supporting books such as Purchase Book, Goods Inward Book, Cash Book, Allowances Book, Discount Register, and Bank Pass Book.

The castings of the accounts in the Bought Ledger should now be checked with the balances as shown in the Schedule of creditors, which has been supplied to him by his client. If the self balancing system is adopted, the auditor should ask for a Schedule of creditors from the client and total of the Schedule should be tallied with the Creditors’ Ledger Adjustment Account in the Ledger Account.

The auditor should examine the entire Creditors’ Statements and with their help the Purchases Ledger balances should be checked. He should see whether the balances of the Purchases Ledger (whether debit or credit) are shown on the proper side of the Balance Sheet.

If provision for reserve for discount on creditors is made, he should ensure that it is not excessive. Such provision for “Reserve for Discount” should not be made unless a provision for “Reserve for Discount” on debtors has been made.

Some Bought Ledger balances may be debit balances on account of goods returned or allowances for defective goods for which payment had already been made. In case such balances are standing for a long time, he should see whether they are bad or doubtful debts. If they are so, he should see that adequate provision is made for reserves.

The debit balance in the Bought Ledger may also be due to the cash having been paid in advance to the seller but the goods might not have been received. This may be due the following reasons-

  1. goods are still with the seller, or
  2. they are in the course of transit.

In both these cases, the auditor should see whether the property in the goods has passed to the buyer or not. If the property is passed an entry “Goods in Transit” or “Goods with the Seller” should be made whereas it has not been passed to his client, the amount may remain as a debit balance.

It is also possible that the “Advances” might be a loan to the other party. Hence he should see whether it is a custom to send advance for the purchase of goods.

Leave a Reply

Recent Posts


Related pages

whats random samplingqualities and qualification of an auditorcharacteristics of a caste systemprinciple of privitydisadvantages of retained profitessential of valid contract in business lawmeaning of rescission in hindidefine contracteesole trader definemerits of personal sellingqualities of auditorwhat is meant by zero based budgetingwhat is the definition of alphanumericwriting a precistransfer pricing in management accountingrole of ratio analysis in the interpretation of financial statementspayback meaningfactoring calculator stepsoperating expenses ratio formulawhat is the difference between forward and futures contractsdeductive and inductive methodprobability and nonprobability sampling definitionqualities of enterpreneuradvantages of joint family systemunrestricted random samplingadvantages of indirect exportingadvantages of planned economyaccount receivable collection periodmeaning of petty cash bookdisadvantage of being a sole traderactivity based costing pros and consrecent monetary policy of rbiemptor meaningdefine deficit financingfdi benefitssmall scale industries uttar pradeshventure capitalist definitiondemerits of decentralisationstandard costing and variance analysis pdfdebenture capitalprecis meaningconsumer cooperatives in indiadisadvantages of decentralizationtrade receivable turnoverindian subcultureswhat does urbanized meanadvantages and disadvantages of foreign aid pdfadvantages of absorption costingsundry creditors meaningconcept of consumer sovereigntywhat causes diseconomies of scaletypes of middlemendescribe the essential features of budgetary controlnpv disadvantagesobjectives of capital budgeting pdfwhat is the function of wtolimitation of absorption costingaccount receivable days outstandinginflation definition macroeconomicsdirect and absorption costingexample of securitizationin lieu of prospectusaccounting inventory turnover ratioultra vires defineterminal digit filing definitionwhat is the difference between hire purchase and leasingresolution for voluntary winding upwhat is departmentalizationvoid vs voidable contractwagering meaningintra viresfunctions and responsibilities of sebi