What is Ledger Scrutiny

View Answer

 

Steps to be followed

1.Open Ledger (In Tally,do Display--Account Books--->Ledger)

 

2.Check Opening Balance (Whether it is matching with last year Closing Balance Sheet)

Note:-Opening Balance will show only for Ledgers of Different Assets and Liabilities of Balance Sheet and not Profit and Loss A/c

 

3. Check Ledger Group (You can Select Ledger and do Ctrl+Enter in Tally)

Ensure that it is in correct head.You can refer Tally Ledger List  for this

 

4.If it is a Expense Ledger ,

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5. If it is an Income Ledger

-v-

  • Do F5 Columnar  in Tally (to get amount and taxes in separate column)
  • Check Whether Vat/Service Tax/Excise charged as per Correct Rate
  • Ensure that Amount of Income matches with amount of Sales shown in different returns filed like Vat,Service tax,Excise
  • Match with Last year Profit and Loss A/c,Check whether there is abnormal increase or decrease in Income amount,If yes enquire about reason for the same

6.If it is an Debtor Ledger

-v-

  • Closing Balance should be a Debit Balance
  • If it is a Credit Balance,it means either Income not booked or Advance Received
  • If Income not booked,book Income by passing Income Entry (Party Dr  To Income)
  • If Advance Given,Change head of Party to Advance from Customer (Current Liability)
  • Do Debtor Aging to find long outstanding debtors and book Provision for Bad Debts
  • Ask for Balance Confirmation or Party Ledgers and do Debtor Reconciilation
  • Check TDS Receivable correctly booked and Match with Form 26AS

 -ev-

7.If it is an Creditor Ledger

-v-

  • Closing Balance should be a Credit Balance
  • If it is a Debit Balance,it means either Expense not booked or Advance given
  • If Income not booked,book Expense by passing Expense Entry (Expense Dr To Party )
  • If Advance Given,Change head of Party to Loans and Advances Assets /Advance from Supplier (Current Assets)
  • Do Creditor Aging to find long outstanding creditor and Write off Amount
  • Ask for Balance Confirmation or Party Ledgers and do Creditor Reconciilation
  • Check TDS Correctly deducted and Match with TDS Returns

 -ev-

8 If it is an Fixed Asset Ledger

-v-

  • Check Whether Depreciation Correctly booked as per Companies Act and Income Tax Act
  • Match with Depreciation Chart as per Companies Act and Income Tax Act 
  • Check Current and Deferred Tax Computation
  • Check Calculation of Profit and loss on Sale of Assets
  • Check Fixed Asset Register if prepared to ensure it matches with amount in Tally of Fixed Asset
  • Obtain Written Confirmation for Fixed Assets kept with third party/employees
  • Check whether Input of Vat/Excise on Purchase of Capital goods available and correctly booked

 -ev-

 

Difference between accounting Company and Non Company

NON COMPANY

COMPANY

Audit is compulsory if

Turnover>2 cr

Or

Showing Less than 8% profit

Audit is always compulsory

 

 

Profit and balance sheet are in tally format

Profit and balance sheet are in Schedule iii format

 

 

We use Dep. As per income tax for passing entry and for paying tax

We use Dep. As per income tax for paying tax and dep is per company’s act for passing entry

 

 

ITR Forms

 

Proprietorship

Audit-ITR 3

Non audit=ITR 4

 

Partnership

Audit - ITR 5

Non audit = ITR 4

Partners having no other business - ITR 2

Partners having other business - ITR 3

ITR Forms

 

Company 

Itr 6

 

 

Directors

Only salary - ITR 1

Salary + business - ITR 4

 

 

   

Dep entry

 

Deprecation a/c

To assets

Dep entry

 

Deprecation a/c

To accumulated depreciation a/c

   

Tax entry

 

Drawing     dr. 

To bank

Separate drawing a/c

 

 

 

 

Capital keeps on changing

Tax entry

 

Tax Exp   dr.

To provision for tax

 

Provision for Tax  dr.

To bank

No drawing account

 

Capital is fixed

   

Profit transferred to capital

Profit shown separately in reserves and surplus

  1. Accounts and Finance
  2. Step 4 Balance Sheet Finalization Procedure
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About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .