Verification of a Contingency Bill
The tehsildar of a sub-division in Uttar Pradesh has passed a contingency bill of ₹1,35,558 prepared by the head clerk. The bill has three items: 18 reams of A4 paper at ₹285 per ream; 12 toner cartridges at ₹1,850 each, on which a trade discount of 10 per cent is admissible; and 40 steel chairs at ₹2,340 each, on which a trade discount of 5 per cent is admissible and GST at 18 per cent is payable on the net value after trade discount. Paper and cartridges are exempt from GST.
The head clerk computed the chairs at list price, applied GST on that list price and deducted no trade discount on them; the paper and cartridge figures are arithmetically correct. The bill was paid in full on 12 March 2024. The accountant recorded it in the cash book as a single-line entry, 'office contingencies - ₹1,35,558', without the bill number and without reference to the stock register. The stock register shows 40 chairs received, but the 12 cartridges were not entered at all.
1. Verify the bill item by item, state the correct payable amount and quantify the excess claimed.
Read the worked answer
Paper: 18 × ₹285 = ₹5,130.
Cartridges: 12 × ₹1,850 = ₹22,200; less 10% trade discount ₹2,220 = ₹19,980. No GST.
Chairs: 40 × ₹2,340 = ₹93,600; less 5% trade discount ₹4,680 = ₹88,920; GST at 18% on ₹88,920 = ₹16,005.60; net = ₹1,04,925.60.
Correct total = ₹5,130 + ₹19,980 + ₹1,04,925.60 = ₹1,30,035.60.
The claim of ₹1,35,558 equals ₹5,130 + ₹19,980 + (₹93,600 × 1.18 = ₹1,10,448). So two linked errors were made on the chairs: the trade discount of ₹4,680 was not deducted, and GST of ₹842.40 was charged on that undeducted amount.
Excess claimed = ₹4,680 + ₹842.40 = ₹5,522.40, which also equals ₹1,35,558 − ₹1,30,035.60. Since the bill was passed and paid in full, the excess is an overpayment.
2. The excess has already been paid. Under what head should recovery be watched, and if it is recovered in six equal instalments, what is each instalment? Also express the excess as a percentage of the correct value.
Read the worked answer
The excess of ₹5,522.40 is not an expenditure item and must not be adjusted against any expenditure head. It should be watched as a separate recovery from the officer held responsible (miscellaneous recovery) until realised, with a show-cause notice to the head clerk before any deduction from pay, and the recovery shown distinctly in the accounts so that it can be traced.
As a percentage of the correct value: 5,522.40 ÷ 1,30,035.60 = 0.04247, that is about 4.25 per cent.
Six equal instalments: 5,522.40 ÷ 6 = ₹920.40. Since paise cannot be drawn from salary, the practical schedule is five instalments of ₹920 and a final instalment of ₹922.40 (5 × 920 = ₹4,600; 5,522.40 − 4,600 = ₹922.40). The alternative of six instalments of ₹921 recovers ₹5,526, which is ₹3.60 in excess and would have to be refunded; the audit should record whichever schedule is adopted rather than leave the paise unadjusted.
3. What control failed in the cash book entry, and which single check would have caught both the overpayment and the missing cartridges?
Read the worked answer
The accountant made one consolidated posting without the voucher number. A single-line entry severs the link between the cash book and the paid voucher, so the bill can never be re-traced, a duplicate payment cannot be detected, and the quantity paid for cannot be compared with what was received. That is precisely how the 12 cartridges escaped the stock register while the payment went through unchallenged.
The check that would have caught both: before the cash book entry is written, the voucher should be compared line by line with the stock register and the bill - quantity, rate, trade discount, tax - and the voucher number and bill number recorded in the cash book.
Backing it up, a monthly reconciliation of purchases per the cash book against entries in the stock register would show 12 cartridges paid for but never received, and the same review would surface the ₹5,522.40 short excess on the chairs, because the bill would then have to be re-computed instead of accepted as a lump sum.