AUDIT OF IMPERSONAL LEDGER PDF

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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We will start by discussing the types of ledger accounts and proceed to their verification and also the verification zudit other accounts. All personal accounts are opened under this category.

If the creditor balance shows debit balance it may be due to advance payment made to him, the Ledgrr should confirm whether the material against advance is received or not.

Posting of all vouchers in ledger account from cash and bank book, sales register, bills receivable register, sales return register and journal should be verified.

Verification of opening balances, castings, balances carried forward should be carefully examined. All the nominal account, real account and capital account fall under impersonal ledger accounts.

Income and expenditure account nominal accounts transferred to profit and loss account. Capital account, real accounts, debtors and creditors account are transferred to balance sheet.

lddger Checking of balances transferred to trial balances, debit and credit side impersonall trial balance should be tallied. It is necessary to include some expenses and income lfdger current year though passing adjustment entries to show the correct profit or loss of the company.

Therefore it is must for an Auditor to check each and every outstanding entries. 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. 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 Ledber to September it will be treated as prepaid insurance.

Prepaid insurance will be shown as prepaid expenses under the head of current assets in the balance sheet. Auditor should vouch every nominal account to confirm whether correct amount of expenses is debited to profit and loss account or not.

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Auditing – Vouching of Ledger

Preliminary expenditure is incurred at the time of incorporation of a new company. These expenses are of heavy amount and are incurred mainly for promotional reasons.

Nature of these expenses are capital but not actually represent any asset, hence should be written off from profit and loss account over a period of 3 to 10 years in equal installments. These expenses are incurred at the time of establishing new business or at the time of introduction of any impersonzl product in the market. These expenses are shown as assets in Balance sheet and should be written off in profit and Loss account over a numbers of accounting periods.

Expenses of heavy repairs of fixed assets shall not be debited to profit and loss account of year in which these expenses incurred but it should be spread to number of years like other deferred revenue expenses.

There are some expenses and liabilities that come up in due course of business; these are due for payment but not paid till the end of accounting period in question. The Auditor should see all those expenses and liabilities and all these expenses should be included in profit and loss of the current year to arrive at the true profit or loss of the firm.

Audit fees are debited to profit and loss account of the same year for which audit is conducted. No doubt main audit work start after the close of financial year and finalization of financial statements are done in next financial year but it is a widely accepted practice to do so. It is also argued that audit fee should be debited to the profit and loss account in the next year in which the audit work is actually performed. In the first case, audit fees will be debited and the audit fees payable will be credited.

In case where the purchased goods are received in the current financial year and invoices for the same are received in next year, purchase should be debited and outstanding liabilities should be credited.

What Is Ledgers | Different Types Of Audit Of Ledgers | Free Online Notes

Rent on factory premises, office building, godown, etc. The Auditor should confirm that any unpaid amount of rent for the last month of the financial year or any other month of financial year in question should be added to rent of the current year and the rent payable should be shown as current liabilities. Commission on sale is payable to agent, director or salesmen on the basis of sales. Whether TDS is deposited in time or not.

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After adjusting all the above, if there is any amount that is payable to the agent, it will be shown in current liabilities as commission payable and if any excess amount is paid that will be shown as current asset representing the amount recoverable from the agent. The Auditor should carefully examine the interest on loan from bank, loan from outsider parties, unsecured loan, financial institutions, term loan and interest on debentures.

WHAT IS LEDGERS | DIFFERENT TYPES OF AUDIT OF LEDGERS | AUDITING

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. Salary and wages for the last month of the accounting year is normally paid in the next wudit year. Transporters normally provide bills for transportation charges after closing of financial year. It is a duty of an Auditor to take these expenses in the imprrsonal financial year creating liabilities for the same. Contingent liability may be payable in future ledher may not be payable in future it depends on the event.

For example, if any person filed a suit against company, possibilities are there, it may be in favor of company or it may be against the company, in case it will decide against the company, company has to pay such amount of suit as the court decides. Therefore, contingent liabilities are said to be possible liabilities.

In case of above, no lwdger provision is made in the books of account but as a footnote of Balance sheet, it is compulsory to show the probable amount of liabilities. Contingent assets are not shown as footnote of the balance sheet. Auditing – Vouching of Ledger Advertisements.