CHAPTER FOURTEEN THE VOUCHER SYSTEM.

CHAPTER FOURTEEN THE VOUCHER SYSTEM

INTERNAL CONTROL OF EXPENDITURES
Management needs to see that: Expenditures are made only for goods and services needed by the business and at a fair price. This is done by direct involvement in small businesses. Larger businesses must use an internal control system.

INTERNAL CONTROLS Set of procedures used to ensure that there is proper accounting for all activities of the business. Three elements: Segregation of duties Authorization procedures and related responsibilities Adequate documents and records

SEGREGATION OF DUTIES Different employees should be responsible for different parts of a transaction: Provides a built-in check by one employee on another Employees who account for transactions should not also have custody of the assets. One employee cannot obtain goods for personal use without being caught by another employee.

AUTHORIZATION PROCEDURES AND RELATED RESPONSIBILITIES
Every business activity should be properly authorized. It should be possible to identify who is responsible for every activity that has occurred.

ADEQUATE DOCUMENTS AND RECORDS
All business transactions should be: Supported by a document that is Prenumbered Used in sequence Subsequently accounted for In this way, the business can be sure that it has made a record of each transaction.

VOUCHER SYSTEM Control technique that requires that every acquisition and subsequent payment be supported by an approved voucher Combines ALL 3 elements of internal control.

Authorized person prepares requisition
PURCHASING PROCESS USER DEPT Purchase Requisition Authorized person prepares requisition

PURCHASING PROCESS Purchasing department:
USER DEPT PURCH. DEPT Purchase Requisition Purchase Order Purchasing department: Reviews and approves the requisition Prepares Purchase Order to send to supplier

PURCHASING PROCESS USER DEPT PURCH. DEPT RECEIVING DEPT Purchase Requisition Purchase Order Receiving Report When the goods are received, a Receiving Report is prepared.

PURCHASING PROCESS USER DEPT. PURCH. DEPT. RECEIVING DEPT. ACCTG. DEPT. Purchase Requisition Purchase Order Receiving Report Vouchers Payable section of Accounting Department receives Purchase Requisition, Purchase Order, and Receiving Report.

PURCHASING PROCESS USER DEPT. PURCH. DEPT. RECEIVING DEPT. ACCTG. DEPT. MAIL-ROOM Purchase Requisition Purchase Order Receiving Report Purchase Invoice Supplier sends Purchase Invoice which is received by the mailroom and sent to the Accounting Department.

PURCHASING PROCESS USER DEPT. PURCH. DEPT. RECEIVING DEPT. ACCTG. DEPT. MAIL-ROOM Purchase Requisition Purchase Order Receiving Report Purchase Invoice If any aspect of the purchase is improper, it will be caught here. Accounting Department reviews the Purchase Invoice to determine if it is: For the goods ordered At the correct price For the correct quantity

PURCHASING PROCESS Accounting Department prepares a voucher
USER DEPT. PURCH. DEPT. RECEIVING DEPT. ACCTG. DEPT. MAIL-ROOM Purchase Requisition Purchase Order Receiving Report Voucher Purchase Invoice NO payment may be made without an approved voucher. Accounting Department prepares a voucher which is the basis for paying invoice on the due date

Enter in Voucher Register
PURCHASING PROCESS USER DEPT. PURCH. DEPT. RECEIVING DEPT. ACCTG. DEPT. MAIL-ROOM Purchase Requisition Purchase Order Receiving Report Voucher Purchase Invoice Voucher is entered into the voucher register (a special journal). Enter in Voucher Register

Enter in Voucher Register
PURCHASING PROCESS USER DEPT. PURCH. DEPT. RECEIVING DEPT. ACCTG. DEPT. MAIL-ROOM Purchase Requisition Purchase Order Receiving Report Voucher Purchase Invoice Enter in Voucher Register Unpaid Voucher File Voucher is filed by due date.

VOUCHER SYSTEM Incorporates all 3 elements of internal control:
Duties are segregated Different employees order, receive, and record the purchases. Authorization Required to order the goods and to prepare the voucher Documents and Records Every purchase is supported by a voucher, purchase invoice, receiving report, purchase order, and purchase requisition.

PREPARING A VOUCHER THREE STEPS

STEP #1 Compare the invoice with the purchase requisition, to determine that: Purchase Requisition Quantity invoiced was quantity requested

STEP #1 Compare the invoice with the purchase order, to determine that: Purchase Order Quantity invoiced was quantity order Also, that price and terms are proper

STEP #1 Compare the invoice with the receiving report to determine that: Receiving Report Quantity invoiced was quantity received

STEP #2 Judge whether the purchase is appropriate for the business

STEP #3 Verify all computations on the invoice Quantity x Price?
Any discounts?

VOUCHER IS PREPARED On the FRONT of the voucher: Voucher Date
Prenumbered 4/11/-- 1/15, n/30 Voucher No.111 Terms

VOUCHER IS PREPARED On the FRONT of the voucher: 4/11/-- 1/15, n/30
Voucher No.111 Due date EZX Corp. 4/24/-- 2928 Rhodes Ave. Chicago, IL Name & address of supplier

VOUCHER IS PREPARED On the FRONT of the voucher: 4/11/-- 1/15, n/30
Voucher No.111 EZX Corp. 4/24/-- 2928 Rhodes Ave. Chicago, IL Invoice date 4/9/-- Computers - 3 $5,700 Invoice amount Laser Printers - 3 3,000 $8,700 Description of items purchased

Voucher Section Supervisor
VOUCHER IS PREPARED On the FRONT of the voucher: 4/11/-- 1/15, n/30 Voucher No.111 EZX Corp. 4/24/-- 2928 Rhodes Ave. Chicago, IL 4/9/-- Computers - 3 $5,700 Laser Printers - 3 3,000 $8,700 Authorization Voucher Section Supervisor signs the voucher

VOUCHER IS PREPARED On the BACK of the voucher: Account Debited
Acct No. Voucher No.111 Amount Summary Purchases 501 $8,700 Invoice $8,700 The accounts and amounts to be debited Discount Net $8,613 Check No. Distribution

Acct. Dept. Supervisor approves the account distribution
VOUCHER IS PREPARED On the BACK of the voucher: Account Debited Acct No. Voucher No.111 Amount Summary Purchases 501 $8,700 Invoice $8,700 Discount Net $8,613 Check No. Distribution Acct. Dept. Supervisor approves the account distribution

This area is filled in at the
VOUCHER IS PREPARED On the BACK of the voucher: This area is filled in at the time of payment. Account Debited Acct No. Voucher No.111 Amount Summary Purchases 501 $8,700 Invoice $8,700 Discount Payment Date Net $8,613 Check Amount 4/24/-- Check No. 437 $8,613 Distribution

VOUCHER REGISTER A special journal used to record purchases of all types of assets and services: Similar to an expanded purchases journal If a Voucher Register is used, it replaces the purchases journal Debit columns for Purchases, Supplies, Wages Expense, and General Credit column for Vouchers Payable

VOUCHER REGISTER A voucher is recorded by entering the following: Date
Page 4 Date Voucher No. Issued To PR Purchases Debit 1 2 A voucher is recorded by entering the following: Date Voucher number Person or business to whom the voucher is issued Dollar amounts of debits and credits 3 4 5 6 7 8 9 10 11

VOUCHER REGISTER Page 4 Date Voucher No. Issued To PR Purchases Debit
1 4/2/-- 106 Triumph Leasing 2 3 4 5 6 7 15

VOUCHER REGISTER Page 7 Supplies Debit Wages Exp. Debit General Debit
Vouchers Pay. Credit Payment Account PR Amount Date Ck # 1 Rent Exp. 2,400 2,400 2 3 4 5 6 7 15

1 4/2/-- 106 Triumph Leasing 2 4/4/-- 107 Sam’s Cyberware 1,400 3 4 5 6 7 15

Vouchers Pay. Credit Payment Account PR Amount Date Ck # 1 Rent Exp. 2,400 2,400 2 1,400 3 4 5 6 7 15

1 4/2/-- 106 Triumph Leasing 2 4/4/-- 107 Sam’s Cyberware 1,400 3 4/4/-- 108 Compucraft, Inc. 3,300 4 5 6 7 15

Vouchers Pay. Credit Payment Account PR Amount Date Ck # 1 Rent Exp. 2,400 2,400 2 1,400 3 3,300 4 5 6 7 15

1 4/2/-- 106 Triumph Leasing 2 4/4/-- 107 Sam’s Cyberware 1,400 3 4/4/-- 108 Compucraft, Inc. 3,300 4 4/8/-- 109 Datasoft 2,500 5 6 7 15

Vouchers Pay. Credit Payment Account PR Amount Date Ck # 1 Rent Exp. 2,400 2,400 2 1,400 3 3,300 4 2,500 5 6 7 15

1 4/2/-- 106 Triumph Leasing 2 4/4/-- 107 Sam’s Cyberware 1,400 3 4/4/-- 108 Compucraft, Inc. 3,300 4 4/8/-- 109 Datasoft 2,500 5 4/9/-- 110 Bemon Office Supply 6 7 15

Vouchers Pay. Credit Payment Account PR Amount Date Ck # 1 Rent Exp. 2,400 2,400 2 1,400 3 3,300 4 2,500 5 160 160 6 7 15

1 4/2/-- 106 Triumph Leasing 2 4/4/-- 107 Sam’s Cyberware 1,400 3 4/4/-- 108 Compucraft, Inc. 3,300 4 4/8/-- 109 Datasoft 2,500 5 4/9/-- 110 Bemon Office Supply 6 4/11/-- 111 EZX Corp. 8,700 7 15

Vouchers Pay. Credit Payment Account PR Amount Date Ck # 1 Rent Exp. 2,400 2,400 2 1,400 3 3,300 4 2,500 5 160 160 6 8,700 7 15

1 4/2/-- 106 Triumph Leasing 2 4/4/-- 107 Sam’s Cyberware 1,400 3 4/4/-- 108 Compucraft, Inc. 3,300 4 4/8/-- 109 Datasoft 2,500 5 4/9/-- 110 Bemon Office Supply 6 4/11/-- 111 EZX Corp. 8,700 7 4/15/-- 112 Payroll 15

Vouchers Pay. Credit Payment Account PR Amount Date Ck # 1 Rent Exp. 2,400 2,400 2 1,400 3 3,300 4 2,500 5 160 160 6 8,700 7 830 830 15

1 4/2/-- 106 Triumph Leasing 2 4/4/-- 107 Sam’s Cyberware 1,400 3 4/4/-- 108 Compucraft, Inc. 3,300 4 4/8/-- 109 Datasoft 2,500 5 4/9/-- 110 Bemon Office Supply 6 4/11/-- 111 EZX Corp. 8,700 7 4/15/-- 112 Payroll 15 23,560

Vouchers Pay. Credit Payment Account PR Amount Date Ck # 1 Rent Exp. 2,400 2,400 2 1,400 3 3,300 4 2,500 5 160 160 6 8,700 7 830 830 15 280 1,700 5,900 31,440

FILING UNPAID VOUCHERS
After the voucher is entered into the register: The voucher and supporting documents are stapled together. Filed in an unpaid vouchers file By due date This file functions as the Accounts Payable ledger.

POSTING FROM THE VOUCHER REGISTER
DAILY: Post each amount from the General Debit column to the appropriate General Ledger account. Insert the date in the Date column and “VR” and the page number in the PR column of each account. Insert the ledger account number in the register’s PR column.

POSTING FROM THE VOUCHER REGISTER
END OF MONTH: Total the amount columns, verify that debits equal credits, rule the columns. Post each column total (except General). Insert the account number below the column total. Insert a “ /” below the General Debit column total.

Supporting Documents;
PAYMENT PROCESS Vouchers Payable Cashier Unpaid Vouchers File Voucher (with Supporting Documents) Step #1 Pull Voucher and Supporting Documents; Send to Cashier.

Voucher (with Supporting Documents)
PAYMENT PROCESS Vouchers Payable Cashier Unpaid Vouchers File Voucher (with Supporting Documents) Voucher Check Step #2 Review Voucher and Documents; Prepare and Sign Check.

Step #3 Send Check to Supplier.
PAYMENT PROCESS Vouchers Payable Cashier Unpaid Vouchers File Voucher (with Supporting Documents) Voucher Check Supplier Step #3 Send Check to Supplier.

PAYMENT PROCESS Step #4 Cancel Voucher and Documents. Vouchers Payable
Cashier Unpaid Vouchers File Voucher (with Supporting Documents) Voucher Check Supplier Cancel Voucher and Documents Step #4 Cancel Voucher and Documents.

PAYMENT PROCESS Step #5 Return Voucher and Documents to
Vouchers Payable Cashier Unpaid Vouchers File Voucher (with Supporting Documents) Voucher Check Supplier Enter in Voucher Register Cancel Voucher and Documents Step #5 Return Voucher and Documents to Vouchers Payable; Record Payment in Voucher Register.

PAYMENT PROCESS Step #6 File Voucher and Documents in Paid
Vouchers Payable Cashier Unpaid Vouchers File Voucher (with Supporting Documents) Voucher Check Supplier Enter in Voucher Register Cancel Voucher and Documents Paid Vouchers File Step #6 File Voucher and Documents in Paid Vouchers File.

PAYMENT PROCESS Step #7 Record Payment in Check Register.
Vouchers Payable Cashier Unpaid Vouchers File Voucher (with Supporting Documents) Voucher Check Supplier Step #7 Record Payment in Check Register. Enter in Voucher Register Cancel Voucher and Documents Enter in Check Register Paid Vouchers File

VOUCHER CHECK Check with space for entering data about the voucher being paid Has two parts: Check (similar to ordinary check) Attached statement (indicates the invoice being paid and any deductions) Not required, but often used in a Voucher system

CHECK REGISTER Special journal used to record all checks written in a voucher system. Replaces the Cash Payments Journal Only three columns: Vouchers Payable (Debit) Purchases Discount (Credit) Cash (Credit)

After a check is written, be entered in the Voucher Register.
CHECK REGISTER Page 4 Date Ck No. Payee Vouch. Pay. Dr. Pur. Disc. Cr. Cash Cr. No. Amount 1 4/1/-- 420 Payroll 105 870 870 2 4/2/-- 421 Triumph Leasing 106 2,400 2,400 19 4/24/- 437 EZX Corp. 111 8,700 87 8,613 20 4/25/-- 438 Bemon Office Supply 110 160 160 21 4/29/- 443 EZX Corp. 115 1,500 1,500 22 Totals 24,340 179 24,161 23 After a check is written, the payment also must be entered in the Voucher Register. 24 25 26

Let’s record the payment
CHECK REGISTER Page 4 Date Ck No. Payee Vouch Pay. Dr. Pur. Disc. Cr. Cash Cr. No. Amount 1 4/1/-- 420 Payroll 105 870 870 2 4/2/-- 421 Triumph Leasing 106 2,400 2,400 19 4/24/-- 437 EZX Corp. 111 8,700 87 8,613 20 4/25/-- 438 Bemon Office Supply 110 160 160 21 4/29/- 443 EZX Corp. 115 1,500 1,500 22 Totals 24,340 179 24,161 23 Let’s record the payment of voucher #106. 24 25 26

VOUCHER REGISTER Find the voucher #. Page 4 Date Voucher No. Issued To
PR Purchases Debit 1 4/2/-- 106 Triumph Leasing 2 4/4/-- 107 Sam’s Cyberware 1,400 3 4/4/-- 108 Compucraft, Inc. 3,300 4 4/8/-- 109 Datasoft 2,500 5 4/9/-- 110 Bemon Office Supply 6 4/11/-- 111 EZX Corp. 8,700 7 4/15/-- 112 Payroll Find the voucher #. 15 23,560

matches the “Issued To.”
VOUCHER REGISTER Page 4 Date Voucher No. Issued To PR Purchases Debit 1 4/2/-- 106 Triumph Leasing 2 4/4/-- 107 Sam’s Cyberware 1,400 3 4/4/-- 108 Compucraft, Inc. 3,300 4 4/8/-- 109 Datasoft 2,500 5 4/9/-- 110 Bemon Office Supply 6 4/11/-- 111 EZX Corp. 8,700 7 4/15/-- 112 Payroll Verify the “Payee” matches the “Issued To.” 15 23,560

Record the date of payment
VOUCHER REGISTER Page 7 Supplies Debit Wages Exp. Debit General Debit Vouchers Pay. Credit Payment Account PR Amount Date Ck # 1 Rent Exp. 2,400 2,400 4/2/-- 421 2 1,400 3 3,300 4 2,500 5 160 160 6 Record the date of payment and check number. 8,700 7 830 830 15 280 1700 5900 31440

POSTING FROM THE CHECK REGISTER
NO DAILY postings Monthly: Total the columns, verify debits equal credits, rule the columns Post each column total to the General Ledger account “CK” for Check Register is placed in the PR column Insert the account number below the column total.

SCHEDULE OF VOUCHERS PAYABLE
Prepared from either: Voucher Register, or Unpaid Voucher File Verifies that the sum of the individual amounts owed to creditors equals the Vouchers Payable balance

FINDING ERRORS If the Schedule of Vouchers Payable does not agree with the Vouchers Payable account balance, the error must be located and corrected. Four steps to locating the error: Verify the total of the schedule. Verify no vouchers were missed or counted twice. Verify the totals in voucher and check registers. Verify the postings.

Example: Returned ALL of the $670 of merchandise purchased
VOUCHER REGISTER Page 4 Date Voucher No. Issued To PR Purchases Debit 1 5/6/-- 121 Compumax 670 2 3 4 5 6 Example: Returned ALL of the $670 of merchandise purchased from Compumax. 7 15

The date of the return is entered. “R” for Return is entered
VOUCHER REGISTER Page 7 Supplies Debit Wages Exp. Debit General Debit Vouchers Pay. Credit Payment Account PR Amount Date Ck # 1 670 5/9/-- R 2 3 4 The date of the return is entered. “R” for Return is entered in Ck No. column. 5 6 7 15

GENERAL JOURNAL A Journal Entry is made to record the return. DATE
DESCRIPTION DEBIT PR CREDIT 1 May 9 Vouchers Payable/Compumax 2 Purchases Returns & Allow. 3 Returned Merchandise 4 5 A Journal Entry is made to record the return. 6 7 8 9 10 11

Example: What if only $250 of the merchandise was returned?
VOUCHER REGISTER Page 4 Date Voucher No. Issued To PR Purchases Debit 1 5/6/-- 121 Compumax 670 2 3 4 5 6 Example: What if only $250 of the merchandise was returned? 7 15

VOUCHER REGISTER The date of the return is entered.
Page 7 Supplies Debit Wages Exp. Debit General Debit Vouchers Pay. Credit Payment Account PR Amount Date Ck # 5/9/-- R/250 1 670 2 3 The date of the return is entered. “R” for Return is entered in Ck No. column. The amount of the return is also noted in the Ck. No. column. 4 5 6 7 15

VOUCHER REGISTER When the payment is made on the remaining balance,
Page 7 Supplies Debit Wages Exp. Debit General Debit Vouchers Pay. Credit Payment Account PR Amount Date Ck # 5/9/-- R/250 1 670 5/21/- 451 2 3 When the payment is made on the remaining balance, the date and check number are noted on the SAME LINE. 4 5 6 7 15

to record the partial return.
GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT 1 May 9 Vouchers Payable/Compumax 2 Purchases Returns & Allow. 3 Returned Merchandise 4 5 A Journal Entry is made to record the partial return. 6 7 8 9 10 11

PARTIAL PAYMENTS PLANNED: UNPLANNED:
Vouchers will be created (one for each installment) and recorded in the usual manner. UNPLANNED: Original voucher is cancelled and new ones are created for each installment payment.

a partial payment of $200 is made.
VOUCHER REGISTER Page 4 Date Voucher No. Issued To PR Purchases Debit 1 5/3/-- 118 PC-Time 600 2 3 4 5 6 Example: On May 7, a partial payment of $200 is made. 7 15

VOUCHER REGISTER The original voucher is canceled.
Page 7 Supplies Debit Wages Exp. Debit General Debit Vouchers Pay. Credit Payment Account PR Amount Date Ck # V122/123 1 670 5/7/-- 2 3 4 The original voucher is canceled. Date of cancellation and new voucher numbers are recorded. 5 6 7 15

to cancel the old voucher.
GENERAL JOURNAL DATE DESCRIPTION DEBIT PR CREDIT 1 May 7 Vouchers Payable/PC-Time 2 Purchases 3 Canceled Voucher 4 5 A Journal Entry is made to cancel the old voucher. 6 7 8 9 10 11

Two new vouchers are recorded.
VOUCHER REGISTER Page 4 Date Voucher No. Issued To PR Purchases Debit 1 5/7/-- 122 PC-Time 200 2 5/7/-- 123 PC-Time 400 3 4 5 6 Two new vouchers are recorded. 7 15

The $200 payment is recorded.
VOUCHER REGISTER Page 7 Supplies Debit Wages Exp. Debit General Debit Vouchers Pay. Credit Payment Account PR Amount Date Ck # 1 200 5/7/- 447 2 400 3 4 The $200 payment is recorded. 5 6 7 15

CHAPTER FOURTEEN THE VOUCHER SYSTEM.

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CHAPTER FOURTEEN THE VOUCHER SYSTEM.

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