Verification Notes

Items Of Profit & Loss A/c

 Income
1. SALES

A) The entity is a manufacturing company which produces a raw material for

manufacturing of EVA footwear and during the year has sales net of discount of
Rs 68,45,109.25/-.

B) All the sales of the company were on cash basis and non of the sale was on
approval basis.

C) The internal control system of the company was satisfactory.

D) Sale bills were checked to know the rate, amount and the amount of VAT on it

E) All the payments from the debtor was received in cheque which was traced in the
bank statement.

F) In case of cancel bill original copy was inspected.

G) The revenue has been recognized as per requirements of AS-9 “Revenue

Recognition”.

H) There was no sales return during the whole year.

2. Other Income
A) In case of other income, the other income aspects only cover the discount received
by the company from the creditors while making payment to them.

 Expenses
1. Purchases

A) The entity has purchase raw material worth Rs 51,33,347.85/- for manufacturing
the product.

B) While vouching purchase invoice it was taken into consideration that the date on
the invoice were only of the current year. It was also look at that the invoice must
bear the name of client.

C) Liability of VAT was also taken into consideration and it was looked that it was
not included in the amount of purchases.

D) Their was some inter-state purchase on whom “C” form was issued by the client.

2. Manufacturing Expenses

A) Being a manufacturing concern the client has to make some expenses to make raw
material into finished product.

B) Following are the manufacturing expenses done by the client:-

 Particulars Amount

Wages Rs 2,57,216/-

Bonus Rs 75,000/-

Electricity Rs 9,36,942/-

Factory Rent Rs 96,000/-

C) Amount of wages were vouch with the help of wages register and pay roll register.
Also payments made to labourer were vouch with the help of cash payment
voucher. As the number of employees was less than as per the requirements of
Employees Provident Act, so no P.F. was deducted.

D) Amount of Bonus was reconciled with the help of bonus sheet and payment was
verify by the help of cash payment voucher.

E) Amount of electricity expenses was reconcile with the electricity bill and payment
was traced in the bank statement as the payment of electricity bill was made
through cheque.

F) Factory rent was paid through cheque which was traced in the bank statement and
rent receipt voucher were verified to check the amount of rent.

3. Administrative Expenses

A) During the year following expenses were made by the company in relation to their
administration work.

B) Following expenses were done by them:-

Particulars Amount

Business Promotion Rs 4,535/-

 Conveyance Rs 5,315/-

Car Running & Maintenance Rs 6,500/-

Director Remuneration Rs 96,000/-

Interest on FBT Rs 58.62/-

Insurance-Car Rs 3,106.25/-

Freight Outward Rs 23,247/-

Miscellaneous Expenses Rs 6,153.04/-

ROC Expenses Rs 1,800/-

Printing & Stationery Rs 700/-

Staff Salary Rs 1,92,000/-

Telephone Expenses Rs 2,402/-

Auditors Remuneration Rs 5,618/-

C) Different expenses were paid in respective of Business Promotion which were

vouch with the help of supporting available and the payment was made in cash
which was verified with help of cash payment voucher.

D) Expenses were done on the conveyance of the employee like they were send for
collection. These expense were verified with the help of supporting available like
petrol bill and as these were reimbursed to the employee there was payment in
cash which was verified and also signature of the employee on the voucher to
whom payment was made also verified.

E) The company during the year purchased a new car and company has made
expenses on the petrol which was verified with the help of bill of petrol and all the
payment was made by cash which was cross verified with the help of payment
voucher.

F) As per the Memorandum of Association and Article of Association, directors are

liable to receive remuneration for the services they provide to the company. So in
this regard the are paid Rs 96000/- for the year as remuneration for the year which
was verified with the help of minutes book in which their remuneration was fixed
 and these payment was made through cheque so these were traced in the bank
statement.

G) Fringe benefit Tax or commonly known as FBT is payable on various expenses

incurred by the company for the welfare on it employees. Company has to interest
on it because of late payment of the FBT. This expenses is payable to central
government and was vouch by calculating the amount payable and it is payable on
the date of signing of balance sheet.

H) During the year company has paid insurance premium of it car which was vouch
with the help of policy receipt and the payment was traced in the bank statement
as the payment was made through cheque.

I) Company has to paid amount to various people like truck owners, rickshaw walas
and other people for transporting goods from factory to customer and their
supporting for some people was available and for some was not and all the
payment was made through cash which was authorised by the director themselves.

J) ROC expense are those which are paid to Registrar of Company. During the year
company has paid these expenses. These expenses were vouch with the help of
challans and their payment was made both by the way of cash and also by cheque.
Payment through cheque was reconcile by searching bank statement and payment
through cash was reconcile through payment voucher and also through challans
which specified the mode of payments.

K) During the year company has some expenses of printing and stationery for the
purpose of buying stationery like pencil, pens, register and calculator and also bill
book and other voucher book was also printed during the year. These expense
were reconciled with the help of supporting available like invoice and bill and
their payment made through cash which was verified through payment voucher.

L) Beside making payment for wages there are people also in staff who were provide
salary for their services. These salary amount were reconcile with the help of pay-
roll statement as prepared by the Human Resource Department and they were paid
through cheque which was reconcile by the bank statement.
 M) Company has a telephone connection whose bill were verified for the purpose of
checking the amount debited in profit & loss A/c. It was also looked that the bill
were in the name of the company. There payment was made through cash which
was reconcile through payment voucher of the client and also by the cash receipt
of the telephone company.

N) For providing expertise services auditor has to be paid. His remuneration was
vouch with the help of bill issued by the auditor and his payment was due on the
date of balance sheet.

4. Financial Expenses
During the year there is only one financial expenses that was incurred by the company
is that of Bank Charges of Rs 2,684/- which was reconcile through bank statement
and all these payment was made by bank rather it that the bank of the client has
himself deducted these amount

Items Of Balance Sheet

 Assets

1) Fixed Assets:-
Fixed asset employed of the company include Plant & Machinery, Electrical
Fittings and Car.

A) Opening balance of these assets in the book of account were reconcile with the
audited and signed Balance Sheet on 31 March, 2007.

B) During the year the company has purchased following assets :-

 Particulars Amount

Car Rs 3,84,061/-

Electrical Fitting Rs 49,950/-

And the same was verified by checking the correspondence purchase bills of the
assets and also it was checked whether the fixed assets is properly maintained.

C) And also payment for it was made through cheque so it was traced into the
bank statement on the client.

D) Following is the list of amount of depreciation provided on these assets which

was duly verified :

Particulars Amount

Plant & Machinery Rs 46,422.84/-

Car Rs 1,235.17/-

Electrical Fitting Rs 9,096.46/- `

2) Current Assets :- Current Asset include following item:-

A) Cash And Bank Balance

B) Debtors

C) Inventory

D) Loan & Advances

A) Cash And Bank Balance
i) The company maintain a single current account with Lord Krishna
Bank. Bank has been reconcile with respect to pay-in-slip of it and also with
the Bank Reconciliation Statement and also with the cash book maintain by
the client. Also a confirming a letter from bank was also obtained to confirm
the amount of balance.

ii) In case of cash it was reconcile with the help of cash payment voucher
and cash receipt voucher. It was taken into consideration that cash payment
are properly authorised and there is revenue stamp when the amount exceed
Rs 5000/-. Also physical verification of cash was also done. Cash balance also
included Main cash, Petty Cash, Imprest balances with the Employees etc has
been verified to rule out the possibility of shortage in one covered by other.
While dong ledger scrunity of Cash ledger it was look that cash balance is not
short any day in the year.

B) Debtors
i) First of all a schedule of debtor was taken from the client to knew amount
due

to various debtor.

ii) While checking the sales we were able to check the amount debit to the

respective debtor account.

iii) Payment from them was only received through cheque which was verified

through the pay-in-slip of the bank and also the bank statement was checked.

iv) In case of any cheque bounced it was looked that the amount was rightly

debited into the respective debtor account and also the charges which the bank
has debit in respect of that cheque.
 v) Also direct confirmation was also seek by them by sending a letter of

confirmation.

C) Inventory
While checking for the amount of the inventory or closing stock it was verified
that the quantity shown in the profit & loss account and the rate per unit, looked
while determining the value of closing stock, was cost or market price whichever
is lower. To determine the quantity of the closing stock, stock register was
checked and also the physical verification was done. By checking the stock
register we were able to know the quantity of the stock left with the client in the
end of the year.

D) Loans & Advances

In case of Loans & Advances the company has made Deposits For Plot at
Bahadurgarh Industrial Area of Jhaajar District in the State Of Haryana. This
amount has to paid in four quarterly instalment which was paid only through bank
draft which was verified through the copies of the bank draft and also the
corresponding entry was verified in the bank statement as the draft was made from
the bank in which the company was holding current account. Also other amount
covered in the Loan & Advance was the amount Advances Recoverable in Cash
or Kind and following are the advances recoverable:-

Particulars Amount

Advance Income Tax Rs 15,000/-

Advance FBT Rs 2,191/-

Vat Credit Rs 24,720.27/-

Prepaid Car Insurance Rs 9,318.75/-

Kapoor Oil Mills Rs 31,395/-

i) In case of advance tax the amount was verified with the help of advance tax
challan and also the payment was made through cheque which was verified as
the corresponding entry was checked in the bank statement.
 ii) In case of advance FBT the amount was verified with the help of FBT challan
and also the payment was made through cheque which was verified as the
corresponding entry was checked in the bank statement and the advance FBT
was made through in four instalment and all the challan was looked.

iii) The company has also VAT Credit on the capital goods which it purchased at
the time of its formation and some part of VAT Credit has been taken by the
company at the beginning of the financial year which was verified through the
Sale Tax Return for the first quarter and the remaining is left and the opening
balance was verified from the last year audited abd signed balance sheet.

iv) The company has paid for the insurance of it car and as the insurance policy is
paid for a year therefore there is some amount as prepaid car insurance. It was
check from the insurance cover note and also the calculation was also checked
and the payment was made through cheque which was verified in the bank
statement.

v) The company has paid excess to one of its creditor so the amount is due to be
recovered from them. As the payment was made through cheque it was
checked in the in the bank statement.

 Current Liabilities

A) Creditors:-
i. First of all a schedule of creditor was taken from the client to knew amount
due to various creditor.

ii. While checking the purchases we were able to check the amount credited to
the respective creditor account.

iii. Payment from them was only made through cheque which was verified
through bank statement.
 iv. No debit note was issued by the company against any of the creditor and also
no purchase return was there in the whole year.

v. Also direct confirmation was also seek by them by sending a letter of

confirmation.

B) Duties And Tax Payable :-

In the end of the year company has a VAT liability of Rs 3,240.90/- as during the
year a bill was missed which was only got to enter in the books of account at the
time audit so a liability Of Rs 3,240.90/- arises against the company.

C) Expenses Payable:-

For the year ending company some of amount to payable and these are:-

Particulars Amount

Directors Remuneration Rs 1,86,000/-

Audit Fees Rs 5,618/-

Bonus Rs 75,000/-

Electricity Rs 75,060/-

Salary Rs 2,34,000/-

Wages Rs 21,655/-

i) As Directors as provided services for functioning of the company, so they

have to be paid and for this they were paid an amount of Rs 8,000/- per month
and also amount was also outstanding for them for the preivous year and
which was verified with the help of the minute book and resolution passed to
know about the amount to be paid and also the opening balance outstanding
was checked with the help of the last year audited and signed balance sheet of
the year and also during the year a sum was paid to directors through cheque
which was verified with the help of bank statement.
ii) Audit fees is payable for the audit work done by the auditor and these was
verified with bill raised against it by the auditor and also the last year audit fee
was paid by cash which was cheque through the cash payment voucher.

iii) Amount for the bonus payable to employees was also due for the year and
which calculation was verified with the help of the wages register and it was
looked as all the rules and regulations are been taken into care of the Bonus
Act.

iv) Electricity bill for the month of march was also due which was verified with
the help of bill raised by the company providing the electricity in the area
where the plant is located.

v) Also the salary was also due to Mr Sumit Goel of not only of the current year
but also some of the last year.

vi) Wages for the month of the march was also due which was checked with the
help of wages register.

D) Provisions:-

The company has made some of the provision relating to current year tax and fbt
and these are:-

Particular Amount

Income Tax Rs 24,841.60/-

Fringe Benefit Tax Rs 3,189.59/-

i) The company as per the provision of the Income Tax has to pay tax on the
profit earned by it during the year. The company has made provision fro the
amount of Income Tax it has to paid and its calculation was rechecked for this.
 ii) The company as per the provision of the Income Tax has to pay tax on the
some of the benefit provided by it to its employee during the year. The
company has made provision for the amount of Fringe Benefit Tax it has to
paid and its calculation was rechecked for this.

 Pre-operative Expenses:-
Pre-operative Expenses are those expenses which were incurred by the promoter at
the stage of promoting the company and as per the Income Tax provision the
company can claim its deduction in five equal instalments and the after claiming the
deduction for the current year still some amount is outstanding and the opening
balance was checked from the last year audited and signed balance sheet and the
instalment to be claim during the year was also checked from the balance sheet.