What is a Voucher System in Accounting?

A voucher system is a method for authorizing the disbursement of cash. A voucher is filled out that identifies what is to be paid for, the amount to be paid, and the account number to be charged. Once this voucher is approved, the disbursement system is authorized to issue payment. Thus, a voucher system is a control used to ensure that cash is only spent on authorized purchases.

Steps in the Voucher System

The following steps are typically included in the processing of vouchers within an accounting system:

Invoice receipt. The process begins when a business receives an invoice from a supplier for goods or services rendered. The invoice must be verified against the original purchase order and receiving report to ensure accuracy. Any discrepancies are resolved before proceeding to the next step.
Voucher preparation. A voucher is prepared that summarizes the details of the transaction, including supplier name, invoice amount, due date, and authorization signatures. This document acts as a formal request for payment and serves as an internal control mechanism. It ensures that payments are only made for authorized and verified obligations.
Voucher approval. Once the voucher is complete, it is routed through the appropriate channels for approval by designated personnel, such as department heads or accounting managers. The approval process verifies that the purchase was necessary and aligns with budget guidelines. Only after approval can the voucher move forward for payment scheduling.
Recording the voucher. The approved voucher is entered into the accounting system, typically into a voucher register or the accounts payable ledger. This step officially records the liability owed to the supplier in the company’s financial records. It ensures accurate tracking of outstanding obligations and supports proper financial reporting.
Payment of the voucher. When the payment due date arrives, the accounting department issues a check or processes an electronic payment based on the voucher details. The payment is recorded against the voucher, and the liability is cleared from the books. The completed voucher, along with proof of payment, is filed for audit and recordkeeping purposes.

Advantages of the Voucher System

There are multiple advantages associated with having a voucher system in accounting. They are as follows:

Enhanced control. Since an authorized person must sign off on every voucher, this reduces the risk of unauthorized or fraudulent payments.
Improved paper trail. The presence of vouchers in the accounting system means that there is a clear paper trail that shows who approved and processed a transaction.
Good audit trail. Auditors can verify the authorizations for transactions more easily by inspecting vouchers.
Improved budget adherence. Since someone must approve each voucher, it is less likely that unwarranted expenditures will take place. This makes it easier to adhere to the established budget.
Reduced fraud. Given the authorization requirement built into the voucher system, it is less likely that fraud can occur within an organization.