Journal Voucher

Journal Voucher Meaning

Journal voucher is a document of every financial transaction, having the necessary information such as the identification number of the voucher, date, description of the business transaction, amount of transaction, applicable taxes, a reference to other evidence, the signature of the maker and signature of the authorized person, used recording the transaction in the books of the organization.

Explanation

Journal Voucher

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Types

Journal Voucher types

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Purpose

Features

  1. 1. The journals are standardized
  2. Every journal voucher requires information on the following:
  3. Every journal voucher requires the approval of an authorized person.

Example Format of Journal Voucher

#1 – Purchase of Machinery

Journal Voucher Example 1

Explanation

The company purchased plant & machinery on credit. Plant & Machinery is a real accountReal AccountReal accounts do not close their balances at the end of the financial year but retain and carry forward their closing balance from one accounting year to another. In other words, the closing balance of these accounts in one accounting year becomes the opening balance of the succeeding accounting year.read more in nature (i.e., an asset for the organization). It is not usual for a business of the organization to purchase the plant & machinery daily. Hence, a company cannot issue a purchase voucher. To prepare a document in the records, the company can use a Journal voucher containing all the above details. The invoice from the vendor is used as evidence for the said Journal voucher.

#2 – Provision for Outstanding Expenses

Journal Voucher Example 2

Explanation

At the end of every accounting year, the organization is required to make estimates for the expenses which will be relevant for the end part of the accounting periodAccounting PeriodAccounting Period refers to the period in which all financial transactions are recorded and financial statements are prepared. This might be quarterly, semi-annually, or annually, depending on the period for which you want to create the financial statements to be presented to investors so that they can track and compare the company's overall performance.read more. Hence, provisions are needed to be made. However, the actual bill from the relevant parties (if any) is received in the next accounting period. The documentary evidence is not available. Thus, journal vouchers help serves the purpose. As evidence, a working is prepared wherein the basis of amounts are provided. The assumption is generally based on the management’s experience. Since actual payment is not made & the relevant vendor is also not easily identifiable, the outstanding expenses (liability) account is credited in the books of account

Documents Required for Preparation of Journal Voucher

  • Debit Notes & Credit notes for any purchase return or sale return
  • In case of any services supplied or procured, debit notes or credit notes
  • Bill of the expense in case of prepaid or outstanding expenses.
  • Documents for substantiating the correction of any error
  • Trail mails can also be used as a basis for journal vouchers.
  • Base working for the provisions.

Use & Importance

  • It is used for recording the non-cash & non-trading types of transactions.
  • It helps the auditors understand the impact of financial transactions in a business.
  • It acts as evidence for future reference.
  • It forms the basis of rectification entries.

Journal Voucher vs. Journal Entry

  1. The words “Journal voucher” and “Journal Entry” are used interchangeably. However, there is a difference between the two. The former is the inception of any financial transaction & the later is the effect given in the books of accounts.
  2. Journal entry is recorded in the journal, i.e., the primary books of accounts, while vouchers are the record documents kept as evidence for the journal entry.
  3. Journal entries can be simple (i.e., one debit and one credit) or compound (i.e., one or more debits and/or one or more credits). However, there is no such difference in journal vouchers. Any number of journal entries can be drawn from one journal voucher.
  4. The next step after the journal entry is posting the entries to appropriate ledgers. On the other hand, the next step of the journal voucher is recording the transaction into the system.

Advantages

Disadvantages

Conclusion

Journal vouchers are the inception of the recording of any non-cash transaction. These have a material impact on the profits or losses of an organization. However, these entries serve the purpose of accrual basis of accountingAccrual Basis Of AccountingAccrual Accounting is an accounting method that instantly records revenues & expenditures after a transaction occurs, irrespective of when the payment is received or made. read more of the organization. Also, these transactions are ignored at the time of preparation of the cash flow statementCash Flow StatementStatement of Cash flow is a statement in financial accounting which reports the details about the cash generated and the cash outflow of the company during a particular accounting period under consideration from the different activities i.e., operating activities, investing activities and financing activities.read more.

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