Transactions and vouchers

A business transaction is an exchange with two sides: something is given and something is taken. Buy goods for cash: goods come in, cash goes out. So every transaction touches at least two accounts.

Nothing is written in the books without proof. That proof is a source document: a cash memo for goods bought or sold for cash, an invoice or bill for goods sold on credit, a pay-in-slip for money put into the bank, a cheque, a salary slip. For small expenses that come with no paper, such as tea for staff or a rickshaw fare, the firm writes out its own voucher and an authorised person approves it.

From the source document, the accountant prepares an accounting voucher. There are three kinds.

• Transaction voucher: one debit and one credit.
• Debit voucher or credit voucher (a compound voucher): one debit with several credits, or one credit with several debits. Furniture bought for ₹25,000, paying ₹5,000 in cash and owing the supplier ₹20,000, has one debit (furniture) and two credits (cash and the supplier).
• Journal voucher (a complex voucher): several debits and several credits together.

A good voucher shows the firm's name, the date, a serial number, which accounts are debited and credited, the amounts, a short explanation (the narration), and two signatures: the person who prepared it and the person who authorised it. It should be clear and on good paper.

Vouchers are filed in order of their numbers and kept safely. They cannot be thrown away after the entry is made: the auditors and the tax department will want to see them, so they are kept until audit and tax assessment are over.