As business expanded and corporations grew in size and power, with wider spheres of activity, it became necessary to divide the operations of business concerns into departments, with corresponding divisions of authority. This meant the creation of a central authority to whom an accounting must be made by the departments or branches.
Audits were introduced. Not only did stockholders want to know that the business was honestly conducted, but the managers demanded proof that property entrusted to subordinates was accounted for and that the accounts were accurate—that is, truthful. Not satisfied with the evidence offered by entries in account books, auditors asked for further proof of the payments recorded; they demanded receipts, vouchers.
The voucher as used in modern accounting practice is then something more than a receipt for the payment of money; it is a proof that property has been administered as claimed by the accounting records. "A document which vouches the truth of accounts,"
2. Use of Vouchers. The most general use of the voucher still is as an acknowledgment of the payment of money. In fact, when we speak of a voucher it is usually understood to mean a receipt or acknowledgment of the payment of money for a specific purpose.
A voucher states the exact purpose for which the money is paid, the items either being listed or reference made to a specific invoice or account. Then when receipted it becomes a voucher in fact and takes its place as an integral part of the accounting records. The voucher may be said to form a connecting link, furnishing proof that the money was expended as shown in the records and that it was received by the payee. In this respect it acts as a check against a misappropriation of funds.
As the system of vouchers for payment of money came into more general use, many accountants argued that it should be carried still further. Sales records were vouchered by original orders, shipping receipts, and invoice copies, and purchases by the regular vouchers, but there was no voucher for transactions involving transfers of values from one account to another. In making journal entries involving such transfers, many opportunities for fraud were opened. Just such entries have been frequently used to cover up fraudulent transactions.
The logical step to make the voucher system complete in every detail was the introduction of the journal voucher. If a voucher is provided for each journal entry, the bookkeeper can produce authority for every transaction recorded in his books.
The journal voucher is a voucher of authority, that is, it authorizes the entry involved and must be signed by an officer having power to make such authorization. To the bookkeeper, it is in many cases a protection, for if a question arises as to the legality of a transaction, he can produce his authority for the entry, which will place the responsibility where it belongs.
We have come in contact with cases in which the bookkeeper, following the explicit instructions of an officer of a company, has made entries clearly intended to defraud either creditors or stockholders, only to be later made the "scapegoat" and held jointly responsible with his superior officer.
Not all such entries show their clear intent, though their real purpose be fraudulent. Some of them are so ingenuous and supported by such plausible explanations, that the bookkeeper has no suspicion of their real nature. A case in point: a corporation was organized in a small town to engage in a manufacturing enterprise. Like many another corporation of similar character, the benefits which would accrue to the town, were dwelt upon at length by the promoters, and citizens were induced to invest their savings in small blocks of stock. Also, like many another enterprise entered into and managed by men with no technical training, this little factory struggled along for a few years, always operated at a loss. But a change came; an experienced manager was secured and the business began to exhibit symptoms of a healthy growth. The second year showed a profit; almost enough to wipe out the deficit. The third year the business outgrew the capacity of the plant, and $20,000.00 was invested in new machinery. Not an old machine was discarded. The manager instructed the bookkeeper to charge $15,000.00 of the amount to repairs, explaining that it would off-set the amount which should have been charged off as depreciation in former years. Perhaps,—but it made the books show a small loss instead of a substantial profit for the year. And it is significant that several holders of stock, worth face value, and more, sold their holdings to the manager at an average price of .65. If no profit could be made on such a volume of business as had been transacted that year, what hope for the future?