Source Documents

Topic 3 DACC/DBF Mr Alunga
What Are Source Documents in

Accounting?
An accounting source document provides proof of an economic transaction.
They are the source of the information that is recorded in the accounting ledgers, and they are
used to verify the validity of the transactions.
Accounting source documents are required, for example, to prove the following transactions:
 A manufacturing company purchased and paid for raw material.
 A company shipped products to a customer.
 An e-commerce business sold a product online.
 A user paid for a service subscription.
Goals of an accounting source document

The aims of creating and keeping accounting source documents are:
 To provide proof that a transaction occurred.
 To record and let the other party know that an economic transaction occurs.
 To describe the economic transaction in bookkeeping.
 To calculate and report the taxes.
Content of an accounting source document

In all cases, the accounting source documents must contain at least:
 The date of the transaction.
 A reference number.
 The names of the involved parties.
 The description of the transaction.
 The type of source document (i.e. an invoice, a check).
 The description of the items or services.
 The quantities, amounts, and the currency of the transaction.
Time to keep accounting source documents

According to local legal regulations, a company must retain source documents for several years.
Internal and external source documents

Accounting source documents can be categorized also as internal or external, depending on if
they were generated within the company, or received from another party (e.g. seller of goods).
Generally, external source documents are considered more important, as they provide proof that
your company did have a transaction with another party. For example, if your company
purchased something, but does not have any payment documents from the seller, then the
accountant does not have the right to record such entry in the books.
.
Some common source documents
1
Every business must record every economic transaction on their books and have enough evidence
to support it. Some common source documents used are described below:
Invoice
When a company sells any product or service to another party, it issues an invoice or a bill. The
invoice shows the description of the product, the parties involved in the transaction, the date, the
quantity and the price.
Any time an invoice is issued there is a copy for the buyer and another for the seller.
Cash Receipt
A receipt is a financial source document that provides proof that cash was transferred from one
party to the other.
The receipt contains the names of the two parties involved in the transaction, the date, the amount
of money transferred and the currency.
For example, when a person or a company pays for a product, a cash receipt is supplied as proof
of money transferred.
A check from a cash register

The check printed from a cash register provides proof that a purchase was paid for in cash or by
card.
Purchase order
A purchase order is a source document issued by the buyer to the seller. Initially, it requests a
product or a service, but it is a binding agreement once the seller accepts the purchase order.
Sometimes the purchase order comes after a previous process of negotiation. During that stage,
both parties, the buyer and the seller, agree on the terms and conditions.
A purchase order contains the description of the items, the quantities to purchase, the price, the
delivery dates, and the payment terms.
Sales order
A sales order is a document generated by the seller upon receiving a purchase order from a buyer.
To accept the purchase order, the seller issues an order confirmation specifying the product
details: the product or service with the price, the quantity, the delivery terms, and the seller and
buyer details.
Based on the sales older the seller can generate an invoice for the buyer.
Delivery note
The delivery note is a document that is sent together with a shipment of goods that provides proof
that the goods or products have been delivered.
The delivery note usually shows the names of the parties, delivery location, the date, and the
descriptions and quantities of items in the transaction.
A copy signed by the buyer is returned to the vendor as proof of delivery.
Goods received note

The goods received note (GRN) is like the delivery note, but in this case, it will be issued by the
buyer.
2
It also shows the name of the parties involved in the transaction, the description, the quantities of
items in the transaction, the date, and delivery location.
The goods received note can be sent to the seller when the transaction has been completed. It is
used to match received goods to invoices received from vendors.
Debit note
The debit note can be sent from the buyer to the seller together with returned goods. In this case,
the buyer notifies the seller that they do not intend to pay for the goods if purchased on credit, or
they expect a refund or credit from the seller if goods have already been paid for.
Also, the debit note can be sent from the seller to the buyer when the amount payable by the
buyer increases. In this case, the seller notifies the buyer that in their accounts they have
increased the amount what the buyer owes to the seller. Formally, it can serve as a request for
extra payment from the buyer, e.g. when there were changes to the original invoice.
Credit note
The credit note can be sent by the seller when the buyer has returned the product to the seller,
fully or partially. In this case, the credit note indicates that the buyer does not need to pay for
these products if purchased on credit, or that the seller now owes the buyer a refund, if the buyer
already paid for the products.
Also, the credit note can be sent from the buyer to the seller, in response to receiving a debit note,
to acknowledge a seller’s claim.
Time card
The time card is an internal document that companies use for registering the working hours of the
personnel and pay wages. The time card records the name of the employee, the working day, the
entry time and the exit time.
The time card has evolved over time, from the traditional paper time card to the magnetic card or
fingerprint records.
Bank statement
A bank statement is used to enter payments into the accounting system and match them to
invoices. During an audit, the bank statement allows to verify that the payments entered into the
accounting system, the movements shown in the bank accounts in the company’s records,
actually happened, and show who the receiving/sending party was.
Books of Original Entry

BOOKS OF ORIGINAL ENTRY
The use of Books of Original Entry promotes the division of the ledger which assists management in data
analysis. They make it easier to retrieve information on debtors and creditors, saves time and eliminates many
details from the ledger.
3
The following table shows a list of the books of original entry as well as the source document (s) which form the
basis of the recording in the books.
BOOK OF ORIGINAL TRANSACTIONS RECORDED SOURCE DOCUMENT USED

ENTRY
SALES DAY BOOK CREDIT SALES OF INVENTORY SALES INVOICES

(STOCK)
PURCHASES DAY BOOK CREDIT PURCHASES OF INVENTORY PURCHASES INVOICES

(STOCK)
CASH BOOK ALL CASH AND BANK BANK DEPOSIT AND

TRANSACTIONS, FOR EXAMPLE, WITHDRAWAL SLIPS,
CASH SALES, RECEIPTS FROM CHEQUES DEBIT AND CREDIT
DEBTORS (ACCOUNTS CARD RECEIPTS
RECEIVABLES), PAYMENTS TO
CREDITORS
RETURN INWARDS GOODS RETURNED BY CUSTOMERS CREDIT NOTE SENT

JOURNAL
RETURN OUTWARDS GOODS RETURNED TO SUPPLIERS CREDIT NOTE RECEIVED

JOURNAL
PETTY CASH BOOK CASH TRANSACTIONS OF SMALL PETTY CASH VOUCHERS,

VALUE CASH BILLS
GENERAL JOURNAL ALL TRANSACTIONS WHICH BILLS, RECEIPTS, VOUCHERS,

CANNOT BE RECORDED IN ANY CANCELLED CHEQUES.
OTHER BOOK OF ORIGINAL ENTRY

CASH AND CREDIT TRANSACTIONS
Cash transactions occur when payment is received or made when the transaction takes place. This includes the
use of credit cards and debit cards. A credit transaction is one where payment is to be made some time in the
future, after the transaction. It is important to distinguish between these two types of transactions since the
accounting treatment differs as well as the impact on the balance sheet.
(Activity 3.1)
Robert is the owner of an Auto Part shop located in Papine, Kingston. He purchases 500 carburetors from
Massey Marketing at $35 each, together with 100 shock absorbers at $10 each and 75 disc pads at $25
each. The goods were delivered one week after the order was placed. On checking the order Robert
discovers that the disc pads were the wrong brand and he returns them to Massey Marketing. On checking,
Massey Marketing did not have the correct brand in stock and so Robert was forced to purchase the disc
pads for cash at Car Tech Limited.
Answer the following questions which are based on the scenario above:
Identify the document Robert receives from Massey Marketing with his order.
Name the document Massey Marketing would issue to Robert after he returns the disc pads.
4
(Activity 3.1 – cont’d)
What document would Robert receive from Car Tech Ltd when he purchases the correct brand of disc pads?
Name the prime entry books in Robert’s business where the above transactions would be recorded.
Feedback
(a) The document received would be a Sales Invoice

(b) Credit Note
Cash Bill
Purchases Journal, Return Outwards Journal, Cash Book
Debit Cards
These are issued by commercial banks to customers allowing them to access their accounts using automatic
banking machines (ABM’s). I am sure you have seen commercials for debit cards. In Trinidad and Tobago
they are referred to as ‘LINX’cards. The customer’s account is immediately debited at the point of sale and the
seller’s account is credited. This type of payment has become more popular to avoid a large amount of cash on
the premises. The receipts from debit cards are used to make records in the cash book.
Credit Cards
Credit cards allow customers to charge their purchases of goods and services instead of paying cash. When the
credit card is presented to the seller, it must be verified to ensure the sale does not exceed the approved
amount. The use of computers allows the sellers’ account to be credited with the amount. A percentage of the
sale price is charged by commercial banks for all credit card transactions. Popular credit card companies
include VISA, Master Card and American Express.
SOURCE DOCUMENTS
A source document records the essential elements of any transaction; the date, name and address of the names of
the parties involved and the value of the transaction. They form the basis for the accounting records that are
kept by the business. These documents are retained for future verification. Let us now examine a very common
document that is used in most transactions, an Invoice.
Invoice
An invoice is a document sent to credit customers giving a detailed description of the items, unit price and the
terms and conditions of the transaction. The order number, as well as the name and address of the customer, are
also printed on the invoice. Sometimes the invoice would also alert customers of interest charges when there are
overdue balances. An invoice is made in triplicate and the copies are used by different departments to keep their
own records. Sales invoices are used to record transactions in the Sales Journal. The Purchases Invoice is sent
by vendors and is used to make records in the Purchases Journal. Both the buyer and the seller receive copies of
the invoice and use them to make records.
INVOICE
5
THE PLANT EMPORIUM Invoice No:

Orange Valley Road 45678
San Juan Date
Customer Name Address Order No.
Telephone Fax:
Unit
Qty Description Total
Price
Total
Payment:
Terms and Conditions E&OE
Credit Note
This is a document sent to a buyer when there is a reduction in the amount charged on an invoice. This may
occur when goods are returned or when there is an error in pricing. Goods would normally be returned if they
are faulty or damaged in some way.
Debit Note
If errors occur when an invoice is being prepared the document which is sent to customers to change the amount
charged on the original invoice is a debit note. It is sometimes referred to as a supplementary invoice. Errors
may occur if additional goods were sent to the customer or there was an error on the original invoice.
Discounts
A discount is a reduction in the price of an item. In accounting there are two types of discounts; cash discounts
and trade discounts. Cash discounts are given as incentives to customers to make payments on their account
within a specified period of time. Trade discounts reduce the catalogue price of an item and are intended to
encourage trade. Although they are shown on the sellers invoice, trade discounts are not recorded in the ledger
of the buyer or seller.
(Activity 3.2)
Grey Singh received an order from Jim Young, a credit customer with the following details on September 30
2007:
6x20 inch planter @ $18.00 each

12kgs Fertilizer @12.50 per kg
6
20 bottles of Liquid Grow @ $18.50
The following terms and conditions applied:
Trade discount 10%

5½% 7 days
2½% 30 days
E&OE
You are required to prepare the invoice to be sent to Jim Young.
Explain the meaning of the terms and conditions outlined.
Feedback
INVOICE
GREY SINGH Invoice No:

Orange Valley Road 1245
San Juan
DATE
30/09/07
Customer Name Address Order No.
Jim Young Railway Road 005
Sea View
7
Telephone: 640 8767 Fax: 989 2007
Qty Description Unit Price Total

12 kgs Fertilizer $12.50 $150.00
6 20” Planters - green $18.00 $108.00
20 Bottles Liquid Grow $18.50 $370.00
$628.00
Payment: Less 10% Trade discount $62.80
Total $565.20
Terms & 5½% 7 days E&OE
Conditions 2½% 30 days Carriage Paid
The Terms of payment suggest a cash discount of 5½% if the total of $565.20 is paid within 7 days after receipt
of the invoice. If the total due is paid within 30 days, Mr. Young is entitled to a 2½% discount. E&OE stands
for errors and omissions excepted. It allows the seller the right to alter the invoice even after it has been sent to
the buyer if any errors or omissions are discovered.
RECORDING TRANSACTIONS
Specialized Journals for Stock
As we discussed in an earlier Study Guide, a Journal is a daily record of business in chronological order. The
Sales, Purchases and Return Journals, also called books of original entry or day books, record transactions
dealing only with stock (inventories). The Sales journal record only credit sales of stock and the Purchases
Journal records credit purchases of stock. The Returns Journals records goods previously bought or sold on
credit that have been returned to suppliers or by customers. Cash sales and purchases of goods are not recorded
here, neither the purchase nor sale of fixed assets. These are recorded in the Cash book and the General Journal,
respectively. The layout of the journal is shown below.
Illustration: Format of Journal
Date Details Folio
Amount

Date on the
Invoice
Any business involved in a large amounts of credit transactions would find it advantageous to use specialized
journals. Managers can quickly get totals regarding credit sales and purchases. The Purchases and Return
8
Inwards Journal record increases in stock whilst the Sales and Return Outwards Journals records decreases in
stock.
Example
Demonstrating the recording of transactions in Books of Original Entry
J. Flowers is the sole owner of The Plant Emporium. Her records show the following transactions for the month
of June 2006.
June 01 Sold goods on credit to Green Leaf $110, R. Fig $689 and S. Tato $725
June 05 Received Invoices from T. Tin $1 750 and S. Steel $1 105
June 10 Bought goods on credit from Planters Place $1875
June 13 S. Tato returned $125 worth of goods
June 18 Sold goods on credit to R. Fig with a list price of $1800, allowing a 2.5% Trade discount
June 20 Returned goods to T. Tin $250
Record the above transactions in the appropriate books of original entry.
Feedback to Example
9

JOURNAL

Date Details Folio Amount ($)

06/01/06 Green Leaf SL 110.00
R. Figg SL 689.00
S. Tato SL 725.00
06/18/06 R. Figg SL 1800
Less 2½% trade discount (45) 1 755.00
Total Credited to the Sales A/C 3279.00
PURCHASES JOURNAL
Date Details Folio Amount Amount
10
06/05 T. Tin PL 1 750.00

S. Steel PL 1 105.00
06/10 Planters Place PL 1 875.00
06/30 Total Debited to Purchases A/C GL 4 730.00
RETURN OUTWARDS JOURNAL

06/20 T. Tin PL 250
Total Credited to Return Outwards a/c 250
RETURN INWARDS JOURNAL

06/13 S. Tato 125
Total Debited to Return Inward a/c 125
(Activity 3.3)
Now that you are familiar with the recording procedures of the day books you are to enter up the sales,
purchases, and returns day books from the following details for the month of May 2006.
May 1 Sold goods on credit to L. Long $800, S. Short $1250 and B. Stone $1 620
May 3 Bought goods on credit from S. Lewis $730, J. Makoy $950
May 4 S. Short returned goods to us $370
May 8 Bought goods on credit from A. Ladi $840, B. Ready $1750
May 9 Returned faulty goods to B. Ready $500
May 10 Sold goods on credit to Tovadis Limited $1 290 less 10% trade discount
May 15 Credit purchases from S. Lewis $510, J. Makoy $ 450
May 18 Returned goods to J. Makoy $190
May 24 Credit sales to L. Long $2 700, B. Stone $970
May 28 B. Stone returns some of the goods purchased on May 24, $180
May 30 Tovadis Limited returned goods with a list price of $200
Record the above transactions and determine the amount to be transferred to the Sales a/c, Purchases a/c, Return
Inwards and Return Outwards a/cs.
Feedback
Total credit sales $8 501

Total credit purchases $5 230
Total return inwards $730
Total return outwards $690
The General Journal
11
We just learnt that the specialized journals are used to record transactions dealing with credit sales and
purchases of stock. Other transactions that are unable to fit into those categories, such as the credit purchase or
sale of fixed assets, are recorded in the General Journal. Although the format is essentially the same as that of
the specialized journals, the general journal further analyses the transactions into debit and credit, indicating
which account is to be debited and which account is to be credited. The format of the General Journal is shown
below.
GENERAL JOURNAL
A/C A/C
Date Details Folio
Debited Credited
Journalising is the process of recording entries in the Journal. As with the specialized journals, transactions are
recorded in chronological order. The accounts involved are identified and the account to be debited is written
first. Indented on the second line is the account to be credited. A special feature of the general journal is
the narration, which follows every journal entry. The narration briefly explains the transaction recorded.
Example
Demonstrate the use of the General Journal in recording varying transactions.
May 16 2006 The Plant Emporium purchased, on credit, machinery costing $17 890, from Mackal Limited.
May 20 2006, the Cashier received a voucher for $1150 to pay the insurance for the owner’s personal car.
May 30 2006, the owner invested a further $21000 into the business from her private savings.
th
Before these are recorded in the journal, the accounts involved are identified. Then, using double entry rules
of entry they are recorded in the general journal.
A/C A/C
Date Details Folio
Debited Credited
May 16 Machinery GL 17 800
06
Mackal Limited GL 17 800
Fixed asset purchases on credit
May 20 Drawings GL 1 150
06
Cash GL 1 150
Cash paid for owners personal
insurance
May 30 Bank GL 21 000
06
Capital 21 000
Additional investment by owner
The following transactions are usually recorded in the General Journal:
12
1. Opening entries – this is a list of assets and liabilities used to begin a new accounting period. (See the example
below).
2. The purchase and sale of fixed assets on credit.
3. Correction of errors.*
4. Closing entries.*
5. Writing off uncollectible debts (bad debts).*

6. Depreciating fixed assets.*
*These topics are to be dealt with in a subsequent study guide.
The following shows the opening entries of R. Bull at February 01 2006
Debit Credit
Date Details (Account Titles) Folio
$ $
02/01 Motor Vehicles 35 000
Furniture 60 000
Building 120 000
Cash in hand 1 200
Bank 35 490
Stock on hand 14 500
Debtor: R. Syms 8 210
Creditor: Beltronics Limited
Bank Loan 26 100
Capital 40 000
208 300
Being Assets, Liabilities and Capital
274400 274400
as at Feb. 01.06
You should note that the columns are totalled.
(Activity 3.4)
J. Hermanson began his second year of trading as a sole trader on June 01 2006 with the following balances:
Cash $1650; Bank $8200, Debtors: W. Wilde $750, Plant and Machinery $97000; Office Equipment $34000;
Stock $4370; Creditor: S. Sweete $1450.
Journalise the above opening entries.
13
Feedback
Debit Credit
Date Details (Account Titles) Folio
$ $
1/6/06 Plant and Machinery 97 000
Office Equipment 34 000
Stock 4 370
Cash in hand 1 650
Bank 8 200
Debtor: W. Wilde 750
Creditor: S.Sweete
Capital 1 450
144 520
Being Assets, Liabilities and
145 970 145 970
Capital as at Feb. 01.06
The Cash Book
I am sure you will agree that cash is the lifeblood of any business. Therefore, care should be taken when
recording transactions relating to cash or bank. The Cash book is a unique book of original entry. Although it is
a journal, it also acts as an account for Cash and Bank. This is the only book of original entry that is balanced
and the double entry is completed in the ledger. The cash book records the receipts and payments of cash and
bank. Discounts received and allowed are also recorded in the cashbook for convenience. The format of the
Cash book is also unique, in that the accounts for cash and bank stand side by side along with the discount
column. All receipts are debited and payments credited.

The illustration below shows the basic format of a three-column cash book, (which includes the discount
columns). A two column cash book is one without the discount column.
THE CASH BOOK
Date Details F Cash Bank Dis Date Details F Cash Bank Dis
(RECEIPTS) All (PAYMENTS) Rec
DEBIT SIDE CREDIT SIDE
Recording Entries in the Cash Book
When a document is received, the first analysis is to determine where it should be recorded. Any document
relating to cash or bank, such as, cheque vouchers, cash bills and receipts are used to make records in the cash
14
book. Again it is done in chronological order and the name of the account in the ledger is written in the details
column. If the transaction involves the bank then the amount is written in the bank column. If it is a cash
transaction, then the amount is written in the cash column. Any discount received or allowed is placed in the
discount column.
(Activity 3.5)
List at least five source documents that can be used to make entries in a three column cash book.
Feedback
Your answer should include: Receipts, Cash bills, Payment vouchers, Deposit slips, Cash register slips, cheque
counterfoil.

Contra Entries
Since both cash and bank accounts are in the cash book, it is possible to complete the double entry in the cash
book if the transaction involves both accounts. When this happens it is described as a contra entry. These occur
when cash is deposited into the bank or cash is withdrawn from the bank for use in the office.
BALANCING THE CASH BOOK

The Cash Book is balanced to determine the amount of cash in hand and bank. To balance the Cash Book
means making both sides equal. The columns for Cash and Bank on both sides of the cash book are
totaled. The difference (balance) is determined and added to the side with the smaller amount. The cash
column will always carry a debit balance; this means that the debit side will always be greater than the credit
side, since it is not possible to overspend cash. A credit balance (also called an overdraft) on the bank account
signifies that the account has been overdrawn, that is, cheques were written in excess of the amount in the
bank. Sometimes this is done with the permission of the bank. If no permission is given then any cheques
presented for payment would not be honored by the bank for payment.
Now that you have some idea about recording transactions in the cash book go through the following example,
which demonstrate recording of transactions in a three column cash book.
Example
Record the following transactions of Seren Dippity, a retailer, in his three column cash book for the month of
April 2006.
$
April 01 Cash at bank 1 800
03 Cash sales 1 490
08 Paid cash for cleaning 124
10 Received a cheque from B. Calm 1 500
15 Purchases paid by cheque 1 380
17 Paid rent by cheque 750
19 Received a cheque from S. Leep to settle
his account of $700 less 5% discount
21 Paid cash into bank 1 200
24 Received $900 cash from P. Paine to settle his
account of $950
15
26 Paid D. Serene by cheque to settle an account of

$840 less 5% discount.
Balance the cash book and bring down the balance at the end of the
month.
Feedback to the example
THE CASH BOOK
(RECEIPTS All (PAYMENTS) Rec
)
4/1 Balance b/f 1800 4/8 Cleaning 124
4/3 Sales 1490 4/15 Purchases 1380
4/10 B. Calm sl 1500 4/17 Rent 750
4/19 S. Leep sl 665 35 4/21 Bank C 1200
4/21 Cash C 1200 4/26 S. Serene 798 42
4/24 P. Paine 900 50 4/30 Balance c/d 1066 2237
2390 5165 85 2390 5165 42
5/1 Balance b/d 1066 2237
(Activity 3.6)
Write up the three column cash book of S. Sui from the following details and balance the cash book at the end of
the month.
Aug. 01 Started business with $1800 cash in hand and $16 000 in the bank
Aug. 02 Paid rent by cheque $300
Aug. 03 Paid utilities by cheque $1 240
Aug. 05 Cash sale $4 300
Aug. 07 Received a cheque from debtor C. Lebrity $3400 after allowing $135 discount
Aug. 09 Cash sales paid directly into bank $2 980
Aug. 11 Paid cash into bank $4 000
Aug. 15 Paid account at Vendor Ltd the amount owing $2 900 received 5% discount
Aug. 18 Mr. Sui withdrew $1500 from the bank for personal use
Aug. 20 Paid for motor repairs by cash $850
Aug. 25 Withdrew $500 from the bank for office use
16
Feedback
CASH BOOK
(RECEIPTS All (PAYMENTS) Rec
)
1/8 Balance b/f 1800 16000 2/8 Rent 300
5/8 Sales 4300 3/8 Utilities 1240
7/8 C. Lebrity 3400 135 11/8 Bank C 4000
9/8 Sales 2980 15/8 Vendor Ltd 2755 145
11/8 Cash C 4000 18/8 Drawings 1500
25/8 Bank C 500 20/8 Motor repairs 850
25/8 Cash C 500
31/8 Balance c/d 1750 20085
6600 26380 135 6600 26380 145
5/1 Balance b/d 1750 20085
The Petty Cash Book
Small cash payments and receipts can be omitted from the Cash Book to avoid overcrowding. When this is
done, a Petty Cash Book is used. The format of the PCB facilitates the analysis of transactions so that certain
types of transactions can be posted in aggregate to the ledger. The debit side of the PCB represents receipts
whilst the credit side, which represents payments, is divided into several analysis columns. (See example
below).
PETTY CASH BOOK
Voucher Office
Receipts Date Particulars Total Traveling Postage Stationery
No. Expenses
The PCB operates with an Imprest System. This means that the Petty Cashier is given a float (imprest) at the
beginning of a period from which funds are disbursed. Requests for payment are written on vouchers which
briefly explain the purpose of the payment and indicate the amount. At the end of the period (week or month)
the total cash paid is then reimbursed by the main cashier. This is referred to as restoring the imprest. This
means that the petty cashier is given the exact amount she has disbursed. The totals of the analysis columns are
then posted to the general ledger. Small sums received in the office are also recorded in the petty cash book on
17
the receipt side, although generally there is no analysis. These small receipts would reduce the amount to be
reimbursed.

Example: To determine the amount to restore the imprest

The imprest of a business is $1000 per week. At the end of a week the petty cashier disbursed funds for the
following: car wash $50, Stationery $145, received for telephone calls $15, cleaning $175, Coffee and Tea
$230.
Determine the amount to be reimbursed by the cashier
Solution:
Imprest at the start of the week 1000

Total expenses * 585
Balance of cash remaining 415
Cash required to restore imprest 585
Cash at the start of the following week 1000
*The total sum disbursed = 50+145+175+230=600 less 15 (received) =$585 to restore imprest.
(Activity 3.7)
Enter the following transactions in a petty cash book, having analysis columns for postages and stationery,
traveling expenses, cleaning and miscellaneous.
June 1 Received imprest from the cashier 600

June 3 Bought postage stamps V1 100
June 5 Stationery V2 80
June 9 Taxi fare V3 40
June 10 Office Cleaning V4 72
June 12 Snacks for meeting V5 100
June 14 Paid for weekly newspaper V6 20
June 17 Office cleaning V7 40
June 20 Taxi fare V8 20
June 23 Copy paper V9 30
June 30 Bulbs for the office V10 16
Total the analysis columns and restore the imprest to the original amount. Voucher numbers are consecutive.

18
Feedback
PETTY CASH BOOK
Voucher Postage& Cleaning Misc.

Receipts Date Particulars Total Traveling
No. Stationery Expenses Expenses
$600 1/6 Restore Imprest
3/6 Postage stamps 1 100 100
5/6 Stationery 2 80 80
9/6 Taxi fare 3 40 40
10/6 Cleaning 4 72 72
12/6 Refreshment 5 100 100
14/6 Newspaper 6 20 20
17/6 Cleaning 7 40 40
20/6 Taxi fare 8 20 20
23/6 Copy paper 9 30 30
30/6 Bulbs 10 16 16
518 60 210 112 136
30/6 Balance c/d 82 GL GL GL GL
600 600
82 1/7 Balance b/d
Cash (restored
518 1/7
imprest)
KEY POINTS
19
· Books of Original Entry are useful in eliminating bulky details from the ledger.
· Credit transactions occur when payment is made some time in the future, whereas a cash transaction is where
payment is immediate.
· Source documents record the essential elements of any transaction and are kept for future reference.
· Sales and Purchases Invoices, receipts, bills, debit notes and credit notes are examples of source documents
used to make records in books of original entries.
· Trade discounts are reductions in the catalogue price of goods and are not recorded in the books whereas cash
discounts are given as incentive for prompt payment and recorded in the cash book.
· The Sales, Purchases, Return Inwards and Return Outwards journals are used to record the credit stock
transactions.
· The General Journal records unusual and onetime transactions and is unique in the way each transaction is
analyzed and recorded.
· All non-credit transactions involving cash or bank are recorded in the cash book. This would include credit
and debit card transactions.
· The Petty Cash Book is an analysis book that records all small cash transactions such as the purchase of
postage stamps and gas for office car.

20

21

Source Documents

Uploaded by

Copyright:

Available Formats

Source Documents

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Source Documents

Uploaded by

Copyright:

Available Formats

Topic 3 DACC/DBF Mr Alunga

What Are Source Documents in

Goals of an accounting source document

Content of an accounting source document

Time to keep accounting source documents

Internal and external source documents

Some common source documents

A check from a cash register

Goods received note

Books of Original Entry

BOOK OF ORIGINAL TRANSACTIONS RECORDED SOURCE DOCUMENT USED

SALES DAY BOOK CREDIT SALES OF INVENTORY SALES INVOICES

PURCHASES DAY BOOK CREDIT PURCHASES OF INVENTORY PURCHASES INVOICES

CASH BOOK ALL CASH AND BANK BANK DEPOSIT AND

RETURN INWARDS GOODS RETURNED BY CUSTOMERS CREDIT NOTE SENT

RETURN OUTWARDS GOODS RETURNED TO SUPPLIERS CREDIT NOTE RECEIVED

PETTY CASH BOOK CASH TRANSACTIONS OF SMALL PETTY CASH VOUCHERS,

GENERAL JOURNAL ALL TRANSACTIONS WHICH BILLS, RECEIPTS, VOUCHERS,

(Activity 3.1 – cont’d)

(a) The document received would be a Sales Invoice

THE PLANT EMPORIUM Invoice No:

Customer Name Address Order No.

6x20 inch planter @ $18.00 each

20 bottles of Liquid Grow @ $18.50

The following terms and conditions applied:

Trade discount 10%

You are required to prepare the invoice to be sent to Jim Young.

Explain the meaning of the terms and conditions outlined.

GREY SINGH Invoice No:

Telephone: 640 8767 Fax: 989 2007

Qty Description Unit Price Total

Date Details Folio

Demonstrating the recording of transactions in Books of Original Entry

Record the above transactions in the appropriate books of original entry.

Date Details Folio Amount ($)

Date Details Folio Amount Amount

06/05 T. Tin PL 1 750.00

RETURN OUTWARDS JOURNAL

Date Details Folio Amount Amount

Total Credited to Return Outwards a/c 250

RETURN INWARDS JOURNAL

Date Details Folio Amount Amount

Total Debited to Return Inward a/c 125

Total credit sales $8 501

The General Journal

Demonstrate the use of the General Journal in recording varying transactions.

The following transactions are usually recorded in the General Journal:

2. The purchase and sale of fixed assets on credit.

5. Writing off uncollectible debts (bad debts).*

*These topics are to be dealt with in a subsequent study guide.

The following shows the opening entries of R. Bull at February 01 2006

You should note that the columns are totalled.

Journalise the above opening entries.

The Cash Book

THE CASH BOOK

Recording Entries in the Cash Book

BALANCING THE CASH BOOK

26 Paid D. Serene by cheque to settle an account of

Feedback to the example