Accounts Administration: Vouching

Meaning of a Transaction Record

A transaction record is a written or electronic entry that shows the details of a business transaction, such as its date, the parties involved, what was exchanged, the amount and the document reference.

Vouching is the examination of these records against their supporting documents, called vouchers, to confirm that each transaction is genuine, authorised, correctly recorded and belongs to the business.

Reasons for Transaction Records

Transaction records provide evidence that a transaction took place, support the figures in the financial statements, allow tracing from the accounts to the source and back, help detect errors and fraud, meet legal and tax requirements such as keeping records for ZIMRA, and settle disputes with customers and suppliers. Without them, an auditor cannot confirm that the accounts are true.

When to Record a Transaction

A transaction is recorded when it takes place, that is, when goods or services are exchanged, money is received or paid, or a debt is created. For example, a credit sale is recorded when the goods are delivered and invoiced, not when the customer later pays. Recording promptly, from the source document, keeps the records complete and up to date.

Types of Transaction Records

There are three main types:

Cash transaction record

This records money received and paid, in cash or through the bank, such as the cash book, petty cash book and receipt books. It is vouched against receipts, deposit slips, cheque counterfoils, payment vouchers and bank statements.

Inventory transaction record

This records goods received into and issued from stock, such as bin cards and stores ledger cards. It is vouched against delivery notes, GRNs, stores requisitions and returns notes.

Double entry transaction record

This records the two sides of each transaction in the ledger, through the journals and day books. It is vouched by checking that the debit and credit both agree with the source document and are posted to the correct accounts.

Types of Supporting Documents

The table below lists the main supporting documents and what each proves.

Reasons for Supporting Documents

Supporting documents prove that the transaction is genuine, show that it was authorised, give the details needed for recording, allow auditors to verify the accounts, protect staff by showing they followed procedure, and provide evidence in disputes or for tax purposes. For example, a payment of $450 for repairs is only accepted when the payment voucher is supported by the supplier's invoice and approved by the manager.

Relevant Business Records

Different transactions need different records:

Sales

Sales are supported by sales invoices, cash sale slips, delivery notes signed by the customer, and credit notes for returns.

Receipts

Money received is supported by copies of receipts issued, deposit slips, remittance advices from customers and bank statements.

Clearance records

Goods imported or exported are supported by customs clearance documents, such as bills of entry, and the receipts for duties paid.

Money transfers

Electronic and bank transfers are supported by the transfer confirmation, the authorised payment voucher and the bank statement showing the transfer.

Attaching Supporting Documents

When vouching, the clerk attaches or cross-references each supporting document to its record, for example by stapling the invoice and GRN to the payment voucher, or writing the voucher number beside the cash book entry. Each document is checked for completeness, date, amount, authorising signature and agreement with the record, and then stamped 'paid' or 'vouched' so it cannot be used again. Missing or doubtful documents are listed and followed up.

Necessity of Recording Accurate Information

Accurate information is necessary because the financial statements, tax returns and management decisions are all built from the records. Two needs stand out:

Traceability of the initiator

Each record should show who started, approved and recorded the transaction. This makes people accountable, discourages fraud, and allows questions to be asked of the right person.

Clarity in records

Records must be clear, neat and easy to understand, with full descriptions and correct references. Unclear records cause errors when they are posted and waste time when they are checked.

Recording Information Accurately

Three practices make records accurate and reliable:

Signing of records

The person preparing a record signs it, and the person approving it signs too. Signatures show responsibility and prove that the record was checked and authorised.

Timing of records

Transactions are recorded as soon as they happen, from the original document, so nothing is forgotten and the balances are always up to date.

Dating of records

Every handwritten record is dated in ink, and electronic records carry the date and time automatically. Dates place each transaction in the correct period and make the audit trail easy to follow.

Good Recording Practice

Records are written in ink, never in pencil. Errors are crossed out with a single line and initialled, never erased or covered with correction fluid, so the original can still be read. Documents are pre-numbered and used in order, and spoilt documents are cancelled and kept, not thrown away. Electronic records are protected by passwords and backups. Following these practices means that any figure in the accounts can be vouched quickly and trusted.