How to audit the Sales Book and Sales Return Book?
Goods sold on credit are recorded in the Sales Book. The auditor should be careful while vouching the credit sales as the documentary evidence. A good system of Internal Check regarding credit sales should have the following features:
- On receipt of the order, an entry should be made in the order received book giving details like date, name of the purchaser, goods order.ed, date of delivery etc.
- A copy of the order should be sent to the dispatch department.
- When the goods are being dispatched another clerk should compare the details to ensure that the order is properly complied with.
- Some responsible officer should mark the rates in the invoices being sent.
- The invoice should be prepared in the duplicate or triplicate. One copy will be sent to the clerk who enters in the sales book and this copy will be later sent to the customer. Another copy should be sent to the gate-keeper and the third will be retained for records.
While vouching the credit sales, the creditor will:
He should check the entries in the order book with the copies of the orders received directly from customers or through the traveling agent.
He should check some of the invoices to find out that-nitrates as mentioned in the purchase orders from the customers have been charged in the invoices and the rates agree with those in the price list.
He should check that the quantities mentioned in the delivery challans agree with the quantities required by the customers as mentioned in the customers orders.
He should see that proper excise duty and sales tax have been charged in the invoices.
He should see that if the sales tax is charged at concessional rates, proper declaration form has been asked from the customer.
He should find out that the invoices have been drawn up as per the terms of the payment agreed to by the customers.
He should see that packing, freight, insurance etc., have been charged as per order of the customer.
He should see that the bills or invoices after they were prepared have been checked with regard to both quantities and rates by someone who has not taken part in raising the bills.
If the goods have been sold on ‘Approval Basis’ it should not be treated as Sales unless the approval letter has been received from the customer.
The auditor should pay particular attention to sales relating to the period in the beginning or at the end of the accounting year. This is to make sure that no manipulations have been made in the accounts to inflate the sales.
He should ensure that the sale of capital items like old machinery, old furniture etc. is not entered in the Sales Book.
With the permission of the client the auditor can get the outstanding balance of the customers duly confirmed from them.
He should check some of the entries in the customer’s ledger with the invoice register to see that all credit sales have been correctly posted in the Customers Accounts.
If the goods do not suit the customer’s purpose then they return them to the supplier. The auditor should carefully examine the internal check system in operation regarding Sales return. He should specially check a few entries in the Sales Return Book pertaining to the beginning and the end of the year. He should check a few castings of Sales. Return Book and the postings in the ledger account.