Definition
A voucher in financial terms is a document that serves as evidence for a business transaction. It provides details about the goods or services purchased or sold, including quantities, prices, date and parties involved. Companies use vouchers as a record-keeping tool that supports internal control mechanisms within their finance department.
Phonetic
The phonetic pronunciation of the word “Voucher” is: /ˈvaʊtʃər/
Key Takeaways
- Vouchers can be utilized as a form of currency in specific contexts or businesses, and can be exchanged for goods or services. They often contribute to customer retention and loyalty by providing discounts or special offers.
- Vouchers can play a significant role in fiscal management, particularly in accounting, where they are employed as evidence of a financial transaction. This ensures transparency and aids in the effective tracking of expenses.
- Voucher programs, found often in education systems, allow individuals to use public funds for private education. This often sparks debates about accessibility, education quality, and the proper use of public resources.
Importance
A voucher is significant in the business/finance sector as it serves as an important financial internal control mechanism. It works as an authorization allowing a particular business transaction to occur. Vouchers are duly prepared, approved, and used as evidence to ensure that transactions are accurate and legitimate. By detailing the necessary information such as the involved parties, the date, the costs or charges, and the authorization, they help in maintaining transparency and integrity in the financial operations. Their use means financial transactions can be traced and verified, preventing any fraudulent or unauthorized activities, while maintaining financial accountability and efficiency in auditing processes.
Explanation
The primary purpose of a voucher in finance or business is to ensure accurate financial record keeping and maintain accountability in transactions. It serves as a piece of evidence or a proof document validating that a particular financial transaction has happened and the authenticity of the transaction can be verified. This validation serves as the basis of recording the transaction into the financial records of a company. Thus, a voucher acts as a key tool in auditing, as it provides crucial information about transactions that have occurred in a company.Furthermore, vouchers are used for cost management and control in a business. They keep track of the money that goes in and out of a company essentially contributing to transparency in financial dealings. In addition, they are also utilized in instances of reimbursement, where employees may use vouchers to prove the money they have spent for business-related activities to get paid back. It is also important in claiming certain benefits or discounts in various transactions. Hence, a voucher system can increase financial efficiency and reduce the potential for errors, fraud, or overspending.
Examples
1. Retail Store Gift Cards: When you purchase a gift card from a retail store, that gift card essentially acts as a voucher. It holds a certain value that can be used for transactions within that specific store or brand. An example could be a $50 gift card to Starbucks. Until the voucher is redeemed, Starbucks has a liability on their books for $50.2. Travel Vouchers: An airline might provide travel vouchers to passengers who have had their flights delayed or cancelled. The voucher can be used to book another flight or pay for additional services on the airline. For example, United Airlines once gave out $500 travel vouchers as compensation for overbooked flights. 3. Restaurant Meal Vouchers: Some companies offer meal vouchers to their employees as part of their benefits package. These vouchers can be used at local restaurants or food services. For example, a company like Google may offer food vouchers to their employees to have meals at certain local restaurants around their offices.
Frequently Asked Questions(FAQ)
What is a voucher in finance and business terms?
A voucher is a document that serves as an authorization for payment. It typically contains details about a business transaction, serving as proof that a service or product was provided and that payment is due.
What information is usually included on a voucher?
A voucher usually includes details such as the identity of the recipient, the amount to be paid, the date, and the specific reason for the payment.
Are vouchers used only for business-to-business transactions?
No, vouchers can be used in a variety of financial transactions, not just between businesses. It can be for employee expense reimbursements, for instance.
How does a voucher system work?
In a voucher system, when an invoice is received, it is matched with the corresponding purchase order and packing slip. If everything aligns, a voucher is prepared and payment is approved.
What are the benefits of using a voucher system?
A voucher system can help prevent fraudulent activity and maintain financial control. It serves as a proof of legitimacy for payments, making it easier to manage and track business transactions.
What’s the difference between a voucher and an invoice?
An invoice is a bill sent by the seller or service provider to the purchaser, while a voucher is a document prepared by the purchaser authorizing payment.
Can a voucher be in digital format?
Yes, with advancements in technology, many businesses now use electronic or digital vouchers. These have the same function as a traditional paper voucher, but are exchanged electronically.
Related Finance Terms
- Invoice
- Receipt
- Expense Report
- Reimbursement
- Accounts Payable
Sources for More Information
- Investopedia – www.investopedia.com/terms/v/voucher.asp
- Accounting Tools – www.accountingtools.com/articles/2017/5/14/voucher
- Corporate Finance Institute – www.corporatefinanceinstitute.com/resources/knowledge/accounting/what-is-a-voucher/
- My Accounting Course – www.myaccountingcourse.com/accounting-dictionary/voucher
