Deepak SharmaDeepak Sharma asked 2 years ago
1 Answers
Auditaudit Staff answered 1 year ago

Bought Ledger means Creditors Ledger where we maintain suppliers/creditors account. I am explaining key points see if it helps, please specific doubt you faced in this answer.
What points shall an auditor keep in mind while auditing an account of Bought Ledger having a debit balance?
Answer(Structure of creditors account what is debited what is credited) The structure of every account in the Bought Ledger is – opening balance, credits on account of goods purchased and debits raised in respect of returns, allowances and discount receivable, advances paid against goods, payments and transfers.( Why creditor may have debit balance ?— because of purchase return / rebate for poor goods / advance given to supplier) An account in the Bought Ledger may be in debit. The balance may represent the amount receivable on account of goods returned, rebate allowed by the supplier or advance paid against an order. (What to check if it is because of advance? — is it as per trade practice / subsequent receipt of goods) The auditor should confirm that the advance against the order had been paid in pursuance of a recognised trade practice, also that subsequently goods have been received against the advance (or is it a loan given/is it purchase wrongly debited to creditor ) or will be received, for such an advance may represent a disguised loan to accommodate a business associate. The book balance also may represent the cost of goods purchased wrongly debited to the account of the supplier, instead of the Purchase Account. In each such case, it should be ascertained that the book balance is good and recoverable and if it is not considered recoverable, a provision against the same has been made.
(Presentation in balance sheet as per schedule III, if its loan to directors it should be shown separately as per schedule iii)
The book balances should be appropriately classified for purposes of disclosure in the Balance Sheet. If the debit balance represents a loan to a director or officer of the company, either jointly or severally with another person or it is a debit due by a firm or a private company in which the director is a partner or a member, the same should be separately disclosed in the Balance Sheet in accordance with the provisions contained in Schedule III to the Companies Act, 2013.
The maximum account due from the directors or other officers of the company at any time during the year and debts due from companies under the same management should also be disclosed along with the names of companies (Part I, Schedule III to the Companies Act, 2013)

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