Proof of posting
| Proof of posting |
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| See also |
Proof of posting is an accounting document confirming that transactions recorded in the company's books or records are properly documented. It may manifest itself e. g. through a received VAT invoice, bill or receipt. This makes it possible, among other things, to document relevant costs or revenues (on the basis of which the company's income is earned). Therefore, it may happen that the tax authorities initiate an audit to verify the correctness of settlements for accounting and tax purposes. Such a challenge may result in an increase in the tax base, or even in the imposition of an appropriate financial penalty for unreliable bookkeeping. Therefore, obtaining appropriate proof of posting documents is essential for running a business.
Types of proof of posting
As it was mentioned in the introduction, the following forms of proof of posting are distinguished:
- invoice;
- the bill;
- receipt.
Each of the above-mentioned documents is intended to prove that a specific transaction has been carried out. However, the invoice will be used mainly in trade between traders (with some exceptions when a non-business individual requests that an invoice be issued to him/her). On the other hand, the bill is often issued by an independent contractor, who performed his duties on the basis of an order agreement or a managerial contract. On the other hand, the most common accounting document is a receipt, which documents registered sales to individuals who do not run a business. Each of the documents concerned shall contain, inter alia, the following information:
- information about the amount paid;
- at least one entity involved in the transaction (seller)
- the seller's details;
- the designation of the goods sold.
The aim of this is primarily to map as closely as possible the economic operation carried out.
Negligence in proof of posting
One of the most serious negligence in documenting economic operations is the acceptance of invoices documenting an event that did not occur in reality. This is a tort in the form of unreliable bookkeeping, but also a fiscal offence in the area of issuing fictitious invoices and participating in a tax carousel [1]. However, in terms of receipts, it very often happened in catering services that waiters issued so-called receipts. That is, the ones that haven't yet been recorded on the register. This allows obtaining revenues that are not shown and therefore also not taxed. This is particularly detrimental to national budgets, as it causes significant damage to company tax revenues [2]. It often happens that entrepreneurs use proof of posting as a tool to extort VAT refunds or reduce the tax base in the area of income taxes. This is a measure that has now been sanctioned by severe fines or imprisonment. Therefore, states are trying to counteract this practice. One of such activities is the introduction of security institutions which oblige taxpayers to keep electronic records of registered sales or invoice sales in electronic form with a permanent data link to the server of tax authorities [3].
Examples of Proof of posting
- Receipts: Any type of receipt issued in the course of a transaction can be used as proof of posting. This includes cash register receipts, credit card receipts, invoices, and any other type of document that shows the goods or services purchased and the details of the transaction.
- Bank Statements: A bank statement is a document issued by a financial institution that lists all of the transactions that took place during a specific period of time. This can be used as proof of posting for any kind of financial activity, from payments to deposits.
- Delivery Slips: Delivery slips are documents issued by a company when goods or services have been shipped to a customer. This document includes details about the goods or services, the customer, the order number, and other information pertinent to the transaction.
- Electronic Documents: In today's digital age, many transactions are conducted electronically. This includes things like online purchases and digital payments. These transactions can be verified through email receipts, screenshots, and other types of digital documentation.
Advantages of Proof of posting
Proof of posting is an important document that can help a business to ensure the accuracy of its bookkeeping and tax payments. Its benefits include:
- Improved accuracy in accounting – By providing proof of postings, businesses can reduce the risk of incorrect financial reporting and taxation, as it allows them to confirm and verify the transactions that they have recorded.
- Reduced audit risk – By providing proof of postings, businesses can reduce the risk of being audited by the tax authorities, as they can demonstrate the accuracy of their financial statements.
- Improved cash flow – By providing proof of postings, businesses can improve their cash flow, as they can monitor and track the payments they have received and made.
- Reduced risk of fraud – By providing proof of postings, businesses can reduce the risk of fraud, as they can confirm the legitimacy of their transactions.
- Improved financial transparency – By providing proof of postings, businesses can improve their financial transparency, as they can ensure that their financial statements are accurate and up-to-date.
Limitations of Proof of posting
A proof of posting document does not provide a guarantee of the accuracy of the information provided. Its primary value lies in providing a record of the transaction that has occurred. Here are some of the limitations of proof of posting:
- It is not always possible to determine the exact date of a transaction. As such, it can be difficult to determine the precise timing of certain payments and receipts.
- It does not provide evidence of the quality of the goods and services provided.
- It does not provide information about any additional costs or fees which may be incurred.
- It does not provide any guarantees of the accuracy of the information provided.
- It does not provide any assurance that the transaction has been completed in accordance with applicable laws and regulations.
- It does not provide any information about the parties involved in a transaction.
- It does not provide any information regarding the payment or delivery of the goods and services.
Overall, proof of posting documents provide some assurance that transactions have occurred and can provide a record of the same. However, it is important to note that it does not provide any guarantees of accuracy, quality or legality.
- One approach related to Proof of posting is the use of e-invoices. The use of e-invoices allows companies to store and track invoices electronically, which can help to ensure that the proper documentation is maintained.
- Another approach that is often used in conjunction with Proof of posting is the use of digital signatures. Digital signatures can help to verify the authenticity of documents, ensuring that the proper documentation is maintained.
- Additionally, Proof of posting may also be used to ensure the accuracy of accounting transactions. By maintaining proper documentation, companies can ensure that the transactions recorded in their books and records are accurately and properly documented.
In summary, Proof of posting is an important tool for companies to ensure that their bookkeeping and accounting processes are properly documented. Utilizing approaches such as e-invoices, digital signatures, and ensuring accuracy of accounting transactions can help companies maintain proper documentation and prevent any potential issues with the tax authorities.
Footnotes
References
- Bhasin M., (2012), Corporate Accounting Frauds: A Case Study of Satyam Computers Limited, "International Journal of Contemporary Business Studies", Vol. 3, No. 10., p. 16-20
- Harris D., (2019), Case Studies in (Alleged) Embezzlement and Fraudulent Accounting Practices by Company Controllers, "Journal of Forensic and Investigative Accounting", Volume 11: Issue 1, p. 226-231
- Segal S. Y., (2016), Accounting frauds – review of advanced technologies to detect and prevent frauds, "Economics and Business Review", Vol. 2 (16), No. 4, p. 45–64
Author: Karolina Kopecińska
