Chapter 6- Source Documents

Source Document (p.184) Is a business paper that shows the nature of a transaction.

Who & Why? Government  Tax  Audited Bank  Credit available  Loan Customer  proof of transaction Owner  records/ reference

Information found on source documents for transactions include: Nature of the transaction Types of product or service Names of customers or creditors Transaction date Amount of money involved

Cost Principle (p. 35) State that accounting for purchases must be at cost price (price you paid for it) Value does not change even if market value changes, only if you sell the item

Objectivity Principle (p. 58) Accounting will be recorded on the basis of objective evidence (proof), thus accounting entries will be based on fact and not on personal opinion Source documents provide the proof for transactions and are kept on file for reference purposes

Bills Utilities Telephone Insurance Many more Cheque Monthly Payments Online Direct withdrawal

Purchase Invoice: When the business purchases something on account. The seller will send you a purchase invoice ‘Purchase on account’ Journal entry: Asset or Expense DR A/P CR

Sales Invoice When the vendor sells something on account; send the debtor a sales invoice for goods purchased or services provided ‘Sale on account’ Journal entry A/R DR Revenue CR

Cash Sales Slip: Manual total of a cash sale Point of Sale Summary A computerized sales register that allows a business and its customers to exchange funds electronically (debit) Credit Cards  Pay within 30 days or charged with interest

Cash Receipts Daily Summary Cash receipts list of money coming in from customers (deposit)  Sales cash  Payment by A/R

Cheques: Received from debtors (A/R) ‘Received on account’ Journal Entry: Bank DR A/R CR

Cheque Copies (company issues) Copy of cheque your business has written for: Assets purchased Expenses paid Liabilities paid Owner drawings

Bank Advice Bank Debit Memo: Bank Credit Memo: When bank decrease the business’s cash account (ie. Service changes) Bank’s bank account increases Business’s bank account decreases Bank Credit Memo: When bank increases the business’s cash account (ie. Interest earned) Bank’s bank account decreases Business’s bank account increases The Bank’s Point of View

Exercises: Read Chapter 6.3 p. 184-193 (t) & answer review questions # 3,4,7-10,12-21 p. 193 (t) p. 122-123 (w)