1. Verification & Valuation
C. P. Mansoor S. Ahmed
M. Com, PGDBA

2. Voucher What is a VOUCHER?
It is a documentary evidence supporting the transaction in the Books of Accounts.
Voucher
What is a VOUCHER?
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

3. What do you mean by VOUCHING?
Verification of Transaction in the books of accounts with their respective documents like Invoice, counterfoils of vouchers etc.,
Intelligent Observation made with a Critical Bent of Mind, Common Sense.
Invoice, CF of vouchers: EVIDENCE!
VOUCHING
What do you mean by VOUCHING?
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

4. What do you mean by EVIDENCE?
External & Internal Evidence
Cash in Hand
Challan / delivery notes
Receipts from suppliers etc.,
EVIDENCE
What do you mean by EVIDENCE?
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

5. Reliability of EVIDENCE?
Independent External Sources
Internal Sources Better in case of Sound Internal Control Practice.
Evidence through Auditor’s Personal Knowledge than indirect sources
Written Documents more reliable than oral documents
Different Sources & Different Nature – Consistence ensures Higher Assurance Standards
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

6. What is the Importance of EVIDENCE?
Existence
Rights & Obligations
Occurrence
Completeness
Valuation
Measurement
Presentation & Disclosure
Importance
What is the Importance of EVIDENCE?
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

7. Verification Enquiry – Value, Ownership, Existence & Possession
Opinion – True and Fair
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

8. Valuation It is a part of VERIFICATION!
Evaluation of Values specified on the Balance Sheet.
GAAP – Generally Accepted Accounting Principles
Certificates from competent Professionals
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

9. Valuation - Why Original Cost of Assets Expected Life of the Asset
Wear & Tear of the Assets
Break-up value of Assets
Assets becoming obsolete
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

10. Differences Between Examining the ownership
Verification
Valuation
Examining the ownership
Application of Accounting Principles
Exhibition of Figures & Values
Time Value of Asset adopting Accounting Principles
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

11. Difference Between Techniques Facts and Balances Competent Parties
Confirmation
Verification
Techniques
Facts and Balances
Competent Parties
Inspection of Tangible Assets
Weighing
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

12. General Principles with regards to Types of Assets
Fixed Assets
Floating or Current Assets
Wasting Assets
Intangible Assets
Fictitious Assets
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

13. Fixed Assets Fixed in Nature Earning Income Going Concern Basis
Land :– Cost Price (Purchase Price + Registration Fees + Legal Charges + …)
Plant & Machinery :– Cost Price (Cost of Purchases – Depreciation written off)
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

14. Floating or Current Assets
Temporary in Nature
Resale or Subsequent Conversion
Original Price or Lower
Higher Price – Anticipated Profit
Raw Material
Work in Progress
Finish Goods
Bills Receivable
Cash / Bank Balance
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

15. Wasting Assets Fixed in Nature Depleting Gradually
Process of Working or Extraction
Metal, Granites, Mines, Oil well etc.,
Original Cost - Depreciation
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

16. Intangible Assets Fixed in Nature Income produce ability
Cannot be touched or felt
Valued at Cost Price
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

17. Fictitious Assets Capital in Nature Capitalization of Assets
Benefits in future years
Preliminary Expenses, Discount on Issue of Shares, Discount on Issue of Debentures, Development Expenses etc.,
Recorded at Actual Cost even while written off
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

18. General Principles Focus is on the Balance Sheet of the Company
Balance Sheet – True & Fair view of Assets and Liabilities
Certain Critical Aspects have to be Examined
Assets /Liabilities – ‘Ownership’
Exhibit – Face of Balance Sheet correct figure under appropriate heading
Physical Verification
Every Asset or Liability – Correctly Valued “Valuation”
Cash & Bills Receivable personally examined
Negotiable in Character – Assets in one Sitting
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

19. VERIFICATION & VALUATION
OUTSTANDING ASSETS
OUTSTANDING LIABILITIES
Income Receivable
Prepaid Expenses
Deferred Revenue Expenditure
Unearned Income
Unpaid Expenses
Contingencies
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

20. Accrual Concept Expectancy Rent, Dividends etc., OUTSTANDING ASSETS
Income Receivable
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

21. Partly Current / Future Overloading Current Revenue
Method of Treatment
On the Basis of Time
On the Basis of Revenue
On the Basis of Inventory
OUTSTANDING ASSETS
PREPAID EXPENSES
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

22. Heavy Expenditure – advantage
“Non recurring expenditure which are expected to be of financial benefit to several accounting periods of indeterminate total length.” – Prof. Arnold Johnson.
Heavy Expenditure – advantage
Advertisement Campaign
Development Expenditure on Mines & Plantation
Experimental Expenditure
Research Expenditure, Etc.,
Advertising
Preliminary Expenses
Alterations & Heavy Repairs to Plant etc.,
OUTSTANDING ASSETS
DEFERRED REVENUE EXPENDITURE
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

23. OUTSTANDING LIABILITIES
Unearned Income
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

24. Outstanding Liabilities
Purchases – Creditors
Rents Rates & Taxes
Wages & Salaries
Audit Fees
Freight & Carriage
Travelers & Agents Commission
General Commission
Interest Payable
Outstanding Liabilities
Unpaid Expenses
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

25. OUTSTANDING LIABILITIES
“Contingent Liabilities may be defined as potential obligation which may in future develop into actual liabilities or may dissolve without necessitating any outlay.”
OUTSTANDING LIABILITIES
CONTINGENCIES
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

26. Valuation of Assets during Inflationary Period?
Value of stock is not sufficient to value meet the cost of replacing the same quantity of stock
The depreciation charges based on historical cost of the fixed assets will not provide sufficient amount required to meet the cost of replacing the same asset. If required
If depreciation is provided on the historical cost of the assets and similarly if the stock in trade is valued accordingly, the profits shown by the profit and loss account will not reflect an increase or decrease in terms of purchasing power of the money.
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

27. Suggestions
The replacement cost method of dealing with the fixed assets should be followed i.e. the fixed assets should be valued at replacement cost
The fixed assets should be written up according to the market price of the assets prevailing on the balance sheet date.
The stock-in-trade should be valued at the market price and depreciation should be provided on the value of the stock so arrived.
The index method of adjusting the accounts to reflect the changes in the purchasing power of money should be followed.
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

28. General Principles with regards to Types of LIABILITIES
Share Capital
Reserve Funds & Accounts
Debentures & Mortgage
Trade Creditors
Bills Payable
Loans & Advances
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

29. Share Capital Liability or Not Liability Memorandum of Association
Articles of Association
Cash Book
Pass Book / Bank Statement
Minute Books
Authorized Capital
Subscribed Capital
Issued Capital
Called up Capital
Paid up Capital
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

30. Reserve Funds & Account
Articles of Association
General Reserve
Specific Reserve
Sinking Fund
Reserve or Development Fund
Capital Reserve
Secret Reserve
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

31. Debentures & Mortgage C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

32. Trade Creditors Schedule of Creditors Cash Book Bills Payable Book
Purchase Ledger
Purchase Invoice
Goods Inwards Book
Credit Notes
Returns Outward Book
Bills Payable Book
Cash Book
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

33. Bills Payable Bills Payable Book Bills Payable Account Balance Sheet
Purchases Account
Cash Bank
Balance Sheet
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018

34. Loans Memorandum of Association Articles of Association
Agreement / Contract
Amount
Interest Paid/Payable
Details on charged Assets
C. P. Mansoor S. Ahmed [Master M Ahmed]
Tuesday, November 13, 2018