COVID- LOCKDOWN - BELATED OR IRREGULAR ACCOUNTING - SPECIAL CARE IS NEEDED FOR DATE OF TRANSACTIONS

Regular accounting entries and delayed entries:

When we make entries in books of account on regular basis / daily there is not much problem because the matter is fully known and details are available or can be collected. However, when entries are not made regularly we face many problem in collection, assimilation and deciding about entry and making entry.

Delays due to COVID 19 led lock down and belated entries in accounts:

Due to lockdown, most of organization have faced delay and irregularity in making accounting entries. Communication of information between concerned persons is also not smooth with all facilities not available as would generally be in regular work at office when all concerned persons are available with relevant records.

Therefore practical difficulties arise in such times.

More estimates are to be made:

In such circumstances more than usual accounting  estimates will be required to be made. Reasonable care is to be taken so that   estimates made are correct with little variations. Variations with actual will have to be dealt with in next year.

Dates of transaction

One practical difficulty being faced in irregular or delayed accounting entries is about dates of transaction.   When day to day entry is made, in software for accounting current date appears so there is no mistake in entry for transaction for that day. In case any transaction which was omitted for any reason like mistake or non-availability of document, and entry is made belatedly, one need to be very care full to change the date. Otherwise current date or date of last transaction for which entry was made will be taken by software.

Recently we have observed cases of lot of mistakes in data entry for dates. All transactions have been entered into cash book or bank book and balance as on closing day is tallied. However, during checking it was noticed that dates have been wrong in many transactions. In fact in some cases, on the same date transactions of various dates are entered. Bank account balance is tallied however, if one go to scrutinize the bank book  with bank statement, dates and day to day balance will not appear.

More care required for checking dates:

More care is required to check dates as entered in bank book and as entered in bank statement. For this purpose it is advisable to recheck all transactions with bank statements and   tally dates with bank statement. A practice to enter transactions as per dates in bank statement can be followed. However this will be subject to physical cheques deposited and issued. In such cases dates in bank statement will be different. One can opt for dating transaction on clearance of cheque deposited or issued and in meanwhile keep memorandum  / provisional  entries for internal check and control purposes. This will depend on facility available in accounting software used.

Cash transactions – more care is required:

While entering cash transactions accuracy of dates is very important. A wrong date can be costly if tax authority apply transactions with wrong dates as unexplained or not recorded transactions. It will be difficult to explain and can cause litigation.  

For example in relation to cash deposits and cash withdrawals, dates must be tilled with bank statement. A difference in date can cause major problem in tax matters and unnecessary additions can be made by officers due to difference in dates for unexplained investments/ deposits and unexplained expenditure etc. This can lead to confirmed additions or deletion after lot of efforts in appeals and revision etc.

So it is advisable to enter your transactions on daily basis. In case some time it is not possible like in case of lockdown, take special care to ensure accuracy of dates for transactions particularly involving case receipts and payments.

Auditors should also take special care to ensure entries on correct dates and in case of any mistake proper correction can be suggested.