What Makes an Accounting Entry Defensible: A Documentation Guide
The accounting voucher is the smallest unit of financial information you own, and the quality of every report you pull later is decided there. This covers what a defensible voucher contains, which source document each type of transaction needs, and which common habits hurt you in a tax audit.
The three-year test
Every time you post an entry, ask one question: if in three years, when you no longer work here, an auditor or tax inspector opens this voucher, will they understand what happened without calling you, and will they find evidence for it? If not, the entry is incomplete even though it balances.
A balanced voucher is necessary, not sufficient. I have seen books that were mathematically flawless yet took months to defend, because narrations were vague and attachments incomplete.
Components of a defensible voucher
| Component | Why it matters |
|---|---|
| Voucher number | Continuity; detects deletions and gaps |
| Date | Correct period and chronological order |
| Header and line narration | Understandable without the preparer |
| General and subsidiary account | Reporting and counterparty traceability |
| Debit and credit amounts | Arithmetic accuracy and classification |
| Source document reference | Proof the event occurred outside the system |
| Cost centre or project | Profitability analysis and correct allocation |
| Preparer and approver signatures | Segregation of duties and accountability |
If your software allows attachments on the voucher, use it from day one. A scanned invoice attached to the entry is worth hours of searching through binders on the day of an audit.
Writing a narration
Weak narration is the most widespread defect in small-company books. The pattern I recommend has four parts: nature of the event, counterparty, document number and date, period or allocation.
| Weak narration | Defensible narration |
|---|---|
| For expenses | Repair of pickup no. 12 per invoice 457, Pars workshop, Dey 1404 |
| Payment to Mr Rezaei | On-account payment to electrical contractor per progress certificate 3, contract 102 |
| Per management instruction | Warehouse petty cash settlement for Azar, per attached schedule |
| Sales | Cash sale per electronic invoice 881 to Aria Co. |
Source documents by transaction type
| Transaction | Primary document | Supporting document |
|---|---|---|
| Purchase of goods | Supplier invoice | Goods receipt note, waybill, payment slip |
| Sale of goods | Electronic invoice in the taxpayer system | Delivery note, receipt |
| Services expense | Invoice or contract | Completion certificate, withholding tax slip |
| Payroll | Payroll register and payslip | Employment order, insurance list, payment proof |
| Petty cash | Expense schedule from the custodian | Attached small invoices |
| Bank receipts and payments | Bank slip or system receipt | Bank statement |
| Fixed assets | Purchase invoice and installation records | Title documents, asset tag record |
| Period-end adjustments | Signed calculation working paper | Assumptions and estimate support |
Seven steps to an entry that does not come back
- Review the source document before posting; reject an invoice with no date or no supplier details.
- Determine the nature of the event: expense, asset, prepayment or settlement of a liability.
- Choose the correct general account and always record the subsidiary counterparty.
- Write the narration using the four-part pattern.
- Post the side effects in the same entry: VAT, withholding tax, discounts, freight.
- Attach the document and record its reference number on the voucher.
- Route the voucher for review; preparer and approver should not be the same person.
The most expensive routine error I see is recording contractor payments without applying withholding tax. The expense stays in the books, but on audit both the tax and a penalty are claimed from you — see withholding tax obligations.
Voucher types and their proper use
The opening entry carries in prior balances and must agree exactly with last year's statements. Routine entries record current activity. Adjusting entries carry provisions, depreciation, amortised prepayments and currency translation, and should always have a calculation working paper attached. The closing entry clears temporary accounts. Keeping these four families separate simplifies reporting and shows an auditor the work was done in order.
Never correct an error by deleting or overwriting. Post a reversal, or a separate correcting entry that references the number of the wrong voucher. A traceable chain is a sign of system health, not weakness. How this interacts with statutory book requirements is covered in statutory books and sealing.
Signals that reveal voucher quality
- Monthly aggregated postings instead of event-by-event records.
- Use of "other" or "sundry" accounts for material amounts.
- Sequential vouchers with erratic dates, showing months of delayed posting.
- Debit balances in accounts that are inherently credit balances, and vice versa.
- A persistent gap between the ledger bank balance and the statement, which points to reconciliation that is not being done.
A good voucher also depends on a workable account structure; if customers and suppliers have no subsidiary accounts, no narration can compensate. See designing a chart of accounts.
Key takeaways
- A balanced entry is not automatically a correct one; the real test is comprehension without the preparer.
- Every voucher should reference an external source document, with the reference recorded on the entry.
- A four-part narration — nature, counterparty, document number, period — resolves most later disputes.
- Correct errors with reversals, never deletions; traceability is evidence of a healthy system.
- Separating preparer from approver is the cheapest internal control with the highest return.
Frequently asked questions
What must an accounting voucher contain?
What counts as a source document?
Can a posted voucher be deleted?
Which voucher defects can lead to books being rejected?
Have a question? Just ask
One short call is usually enough to know where you stand. If I miss you, I will call back.