The impersonal ledger contains the whole of the accounts affecting the composition of the Trading and Profits and Loss. Account and all accounts representing assets and liabilities, other than those contained in the personal ledgers. The impersonal ledger is variously known in common usage as the private ledger general ledger or nominal ledger, these terms generally being interchangeable although in many businesses a private ledger is utilized to contain only accounts of an essentially private nature. The term impersonal ledger is here employed to cover all those accounts not included in the personal ledgers.
Except in a very larger business, the amount of detail in the impersonal ledger is not excessive, and the auditor will be able to check the whole of the entries therein. This is important, because, if the auditor is able to verify the correctness of the impersonal accounts, this fact in itself will go a long way towards providing the accuracy of the personal accounts, at any rate in total; one of the commonest methods of concealing manipulations in personal accounts being to make a corresponding fictitious entry in an impersonal account.
The entries in the impersonal ledger will come either from the totals of books of prime entry or their equivalents, the Journal or from the Cash Book. The casts of the various books of prime entry or machine lists, having been verified, the totals thereof should be checked to the accounts in the Impersonal Ledger to which they relate. Where the totals have been subjected to analysis, the analysis should be cast and proved, and the individual items checked to their respective accounts in the impersonal ledger.
The auditor should be particularly careful with entries coming from the Journal since many important transactions are recorded through the Journal.
It should also be ascertained that balances in all income and expense accounts have been adjusted (i) According to standard accounting practices; and (ii) on a consideration of the legal provisions which are applicable to the organization. Each ledger balance finally should be examined on a consideration of its position in the Final Accounts to see how the financial position of the concern would be affected by inaccuracy in the balance.
Wherever practicable, the balances in the Impersonal Ledger should be traced simultaneously into the trial balance, the grouping schedule and the Final Accounts. At the same time, by way of comparison, the corresponding balances in the previous year‟s Final Account in the balance.
It should be confirmed that the accounts have been kept according to accepted principles and Balance Sheet and the Profit and Loss Account have been drawn upon the same basis as in the previous year.
Special attention should be given for the scrutiny of the Impersonal Ledger to cut –off transactions. Such adjustments which affect the Impersonal Ledger are:
(a) Pre-payments like insurance, taxes, etc. By scanning the account, it should be ascertained that the charge only for the full year has been included in the account.
(b) Provision for liability in respect of purchases, rent and taxes, freight charges and salary etc. Thus, if account payable at the close of the year has been paid in the succeeding period, a provision therefore should be made.
(c) Accrual of income adjustments should be checked. For instance, all rent receivable due or accrued to the date of the Balance Sheet should be calculated and brought into account after a provision has been made for doubtful or irrecoverable arrears of rent allowances etc. similarly interest, dividends and payment of insurance premium should also be examined.
(d) Adjustment of advances should be scrutinized. Amount paid as advances should be included as an asset.
The relevant expenses and income should be thoroughly scrutinized to make sure that only such costs and revenue which relate to the period under audit have been carried to the Profit and Loss Account.
The Scrutiny of their impersonal ledger also should cover the review of valuation of assets. The auditor should make sure that generally accepted accounting principles have been followed for charging depreciation and the current assets been valued at lower of cost or net realizable value. The ascertainment of cost should be done consistently from year to year.