Chapter 4 Unit 8 Notes Mrs. Joudrey

A Source Document A Source Document is any business form that serves as the original source of information that a transaction has occurred. It’s a concrete object that proves that a transaction has actually occurred. It is usually prepared with at least two copies so each party gets a copy (example: seller and buyer)

An example of a source document is a SALES SLIP. A Sales Slip is prepared for all cash sales by a business. Three copies are prepared for cash sales slips. Copy 1: given to the customer Copy 2: used by accounting to record transaction Copy 3: Kept in numerical order in a file as a record.

A Sales Slip

A Sales Slip This is the entry that is made by the seller (the company who did the painting services) using copy 2:

A Sales Slip The buyer’s accountant uses copy 1 to enter this transaction:

Sales Invoices are another example of a Source Document A Sales Invoice is the bill completed by the seller and given to the buyer as a record of a credit sale. It’s the bill that records credit sales (where the customer pays at a later date). So if ABC company had landscaping co. come in to put down sods for $500 and they wanted to pay at a later date landscaping co. would create a sales invoice and……

Sales Invoices are another example of a Source Document Copies 1 and 2 would go to the customer (ABC company) Copy 3: they would keep and give to their accounting department to record the transactions Copy 4: Kept by the sales department as a record of the sale.

ABC Company Would Record:

Landscaping Co. Would Record:

Purchase Invoices Purchase invoice is the bill received as proof of a purchase on account. To the seller, Landscaping Co., this is a Sales Invoice. To the buyer, ABC Company, this is a Purchase Invoice.

Net 30 days When a company buys something on credit there are terms set out for re-payment at the time of purchase. We will typically see net 30 days – this means that the amount is due in 30 days. What does net 60 days mean?

Cheques

Cheques Cheques written by a business have two parts - the above part (the actual cheque) and the bottom part that is detached before the cheque goes to the bank to be cashed. That bottom part is what accountants use to record the transaction.

Source Documents are Pre-numbered They already have numbers on them (in sequence) and every one needs to be accounted for. They are already numbered to prevent errors and losses due to theft and the use of false documents. They must be kept on file.

Assignment Please complete question 19 and 20 with the person beside you. You should both write down the answers so you have records of it.