Vouching Forward Purchases, Credit Sales, Sales Return | Guidelines to Auditors

Vouching of Forward Purchases – Procedure, Guidelines to Auditor

In certain businesses, forward contracts are made for future purchase of raw materials at a fixed price. Such deals are called “Forward Purchases”.

Vouching of Forward Purchases, Credit Sales, Sales Return

Vouching of Forward Purchases, Credit Sales, Sales Return

Forward purchase transactions are commonly found in cotton textiles, and oil seeds businesses. As these deals involve huge amounts and are subjected to losses, a provision for loss if any expected is to be made. A reference to the apprehended loss must also be made in a footnote to the Balance Sheet. However, if this is not done, the auditor should qualify his report accordingly.

Vouching of Credit Sales – Procedure, Guidelines to Auditor

Sales Book records only credit sales. The auditor should examine the system of internal check in regard to credit sales, which includes the procedure beginning from receiving orders to the delivery of goods and making payments therefor. If internal check system in operation is sound and effective, the auditor should vouch credit sales in the following manner:

1. He should apply a few test checks.

2. He should compare certain details in the copy of the invoices such as the name, the demand, the amount, etc. with those given in the Sales Book.

3. He should see that the sales are not omitted from being entered in the Sales Book. He can do it by vouching Sales Book with the Orders Received Book and Goods Outward Book.

4. He should see that the sale of an asset is not considered as ordinary sale.

5. If there is a difference in rate of trade discount allowed to two different customers, the reason thereof should be enquired into.

6. In order to confirm the accuracy of balance, the auditor can send Statements of Accounts to the customers.

7. He should check the castings and postings of the Sales Book and also examine the postings to the Ledger Accounts.

8. He should especially examine the sales relating to the periods in the beginning or at the close of the accounting year under audit to ensure that no manipulation has been made in accounts. He may check such sales with the Goods Outward Book.

9. If goods are supplied on “Sale or Return” basis or consignment basis, it should be seen that such goods are not treated as sales till the letters of acceptance have been received.

10. The cancelled invoices should be checked with the duplicate copy of the invoice.

Vouching of Sales Returns – Procedure, Guidelines to Auditor

Sometimes, the customers on account of their being defective or inferior in quality return goods. In such cases, goods returned should be entered in the Goods Inward Book and Gate Keeper’s Returns Inward Book, and Stock Register.

A credit note signed by a responsible official should be prepared, and sent to the customers. There are lot of chances of fraud in connection with the sales returns because goods might not have been returned but a credit note be sent to the customer. Therefore, the auditor should pay particular attention to such transactions. He should pay attention to heavy returns at the beginning or at the end of the business period.

Auditor should check the postings from the Sales Returns Book to the Sales Returns Accounts and Customer Ledger. The goods, which the customers return are included in the closing stock at cost price or market price whichever is less.

Leave a Reply




Recent Posts


Related pages


advantages and disadvantages of world bankmanagerial accounting and cost conceptstypes of banker customer relationshipcomputing inventory turnoverultra vireadvantages of abc analysisstandardisation marketingpay back period calculatorimportances of budgetingaverage accounts receivable collection periodwho is drawer of chequelet the buyer beware meaningnon probability sampling advantages and disadvantagesdemotion definemeaning of mboadvantages and disadvantages of observational researchnationalisation of banks definitiondematerializedwhat are the advantages and disadvantages of sole proprietorshipwhat is fob cifalphabetic filing systemstratified clustercharacteristics of tqmtop 10 businessmantarget costing pricingmix variance formulaprecis formatprinciples of cooperativesdrawer chequefdi of indiadifference between valid void and voidable contractsultra vires contractwhat is capitalist economic systemliquidity ratio acid testmiddlemen definitionmeaning of amalgamation of companiesnon probability quota samplingadvantages and disadvantages of large scale industriesbailment and pledgedepositories meaningquick ratio analysis interpretationvarious types of businesscharacteristic of capitalist economyveil corporationdeclaring dividendshundi paymentaudit workpapersmeaning suretystock turnover ratio formulamerits and demerits of quota samplingrules for precis writingautocratic leadership meaningsebi functions and objectivesmeaning precautionrole and function of wtoshort definition of socialismadvantages and disadvantages of income inequalitypayback period methodexamples of conglomerate mergersholder in due course meaning in hindidistinguish between allocation and apportionment of overheadssebi ipo guidelinesdefine zero based budgetdisadvantages of participative leadershipmultidomesticdefinition arrears paymentpreci writingpayables turnover periodwhat is meant by decentralisationadvantages and disadvantages of a planned economyimf roles