Origin of Transactions and Preparation of Vouchers

 

Introduction

        All accounting transactions are recorded in books of accounts on the basis of written evidence such as cash memo, invoices, cash receipt, pay-in-slip, debit note and credit note etc. The evidences are called ‘Source Documents’.

 

Source Documents

        Source Document is a written document which acts as the documentary evidence of business transactions. It provides complete information of a transaction on the basis of which account are debited or credited. The principle of verifiability and objectivity lays emphasis on source documents.

 

Features of Source Documents

        (a) They act as an evidence of the origin of a business transaction.
        (b) Vouchers are prepared on the basis of source documents.
        (c) They act as proof in the court of law.
        (d) Source documents are required for the purpose of audit and assessment of tax liability.

        (e) These documents are also termed as ‘Supporting Documents’.

 

Most Commonly used Source Documents

1. Cash Memo- Cash Memo is a document prepared by the seller when goods are sold for cash. A specimen of cash memo is as under:

TAX INVOICE

CASH MEMO

G.S. Garments

(Deals in Readymade Clothes)

63/11, Govind Nagar Market, Kanpur

       No. G26              To Dr. Ram Panjwani                         Dated: 6-01-2019

2. Invoice or Bill- An Invoice or Bill is a document prepared by the seller when the goods are sold on credit. It is prepared in duplicate. The original copy of the sales invoice is sent to the purchaser and its duplicate copy is retained as an evidence of sale for recording the transaction in the books of accounting. A specimen of invoice is given below:

3. Receipt- When cash or cheque is received from a customer, a receipt is issued for the amount received. It is prepared in duplicate. The original copy of receipt is issued to the customer while duplicate copy is kept for reference in future. Specimen of receipt is given below:

4. Pay-in-Slip- Pay-in-slip is a document used to deposit cash or cheque into bank. It has two portions, namely pay-in-slip and counterfoil which is returned by the bank to the customer after stamped and signed by the cashier. Counterfoil is not signed if the cheque alongwith the filled pay-in-slip is to be dropped in a box placed in the bank. The counterfoil of pay-in-slip is preserved by the customer which is an evidence that cash/cheque has been deposited in the bank. A specimen of pay-in-slip is given below:

5. Cheque- Cheque is document in writing drawn upon a specified bank with which the account is held and is payable on demand. The name of the party to whom payment is to be made is written after ‘Pay To’. The amount is written both in words and figures. A cheque must be dated and signed by the drawer. Each cheque book has a counterfoil in which the details regarding different cheques that have been issued are filled in. The counterfoil remains with the account holder for future reference. The counterfoil acts as the source document for making entries in the books of accounts.

6. Debit Note- Debit note is prepared and sent by the buyer of the goods to the seller of goods stating that his account has been debited by the buyer of the goods with the specified amount. The reason for preparing debit note may be return of defective goods or goods is not as per sample or goods have been overvalued by the seller or less discount is allowed by the seller etc. The effect of debit note is that the indebtedness of the buyer is reduced to the extent of stated amount.

 

7. Credit Note- Credit note is prepared by the seller of the goods When he receives the sold goods back from the buyer of the goods or for allowing more discount to the buyer. The effect of credit note is that the indebtedness of the customer is reduced to the extent of stated amount. Its specimen is as under:

Voucher

        A voucher is an accounting record of a business transaction that is supported by various source documents. Whenever a transaction takes place, then first of all, entry is recorded on voucher on the basis of source document. Then, on the basis of vouchers, recording is made in the Journal or Subsidiary Books. Source documents are also called source vouchers or supporting vouchers. Examples of source documents are Cash Memo, Invoice or Bill, Receipt, Pay-in-Slip, Cheque, Debit and Credit Notes, etc.

Accounting Vouchers

        Accounting voucher is a written document prepared by the accountant on the basis of supporting vouchers duly counter-signed by another authorized person for the purpose of recording transactions in the books.

Types of Accounting Vouchers

1.   Cash Vouchers

2.   Non-Cash Vouchers or Transfer Vouchers

 

1.   Cash Vouchers- Cash voucher refers to the voucher which is prepared at the time of receipt of cash or while making payment in cash. Cash Vouchers may be of two types:

(a)       Debit vouchers- Debit vouchers are prepared at the time of making payment either in cash or through cheque.

Format of Debit Voucher-

(b)       Credit vouchers- Credit vouchers are prepared when cash is received.

Format of Credit Voucher-

 2. Non-Cash Vouchers or Transfer Vouchers- Non-Cash vouchers are prepared for non-cash transactions. These vouchers are prepared for transactions such as:

·         Credit Purchase/ Sale of goods

·         Credit Purchase/ Sale of Fixed Assets

·         Sales Return and Purchase Return

·         Provision for Depreciation

·         Writing off Bad Debts

Specimen of Transfer Voucher-