The Journal and Source Documents Unit 3 : Chapter 6 The Journal and Source Documents Chapter 6 Quiz will be on October 24 (Friday)

Bank Statement Bank Statements are printed by bank every month. For example, January statement will be printed on Feb 2, and the business would receive the bank statement on Feb 5. It shows all the transactions, which occurred through your bank account such as check payment, bank debit memo, bank credit memo and pre- authorized payment.

Bank Statement But other transactions (such as the transactions you used credit card) would not show up on bank statement. In reality, many of the “additional source documents” that we talked about yesterday, (such as insurance payments, loan payments, mortgage payments and cell phone payments) can be found in bank statement.

Bank Statement Theses items are usually pre-authorized payments, so accountants might not even get the source documents. Pre-authorized payments – are pre-arranged payments. For example, insurance payments are typically pre-arranged payments, (like $120 every month) so the accountant might not receive any source documents, but accountants can still make journal entries without source documents. Usually you will see the payment (money going out in Bank Statement)

Review Activity If Futureshop buys 500 units of laptop from Apple corporation on Feb 1 on account, who would make sales invoice?

Review Activity Answer: Apple This invoice becomes purchase invoice for whom?

Review Activity Answer: Future shop Conclusion: The same invoice become sales invoice for seller, and it becomes purchase invoice for buyer.

Review Activity If you see the following note, what kind of journal entry would you have to make? Supplier’s name: Staple (bought office supplies 30 days earlier), so I wrote the following checks: Check #109 $20 Invoice # 5621 Check #110 $40 Invoice # 5622 Check #111 $30 Invoice # 5633

Review Activity Answer: You would debit AP and credit Bank Feb 1 AP- Staples 90 Bank 90 Paying off AP for Staples (3 invoices)

Bank Memo Sometimes bank initiates a change in the bank account of a business. Then they inform the client (business) of the transaction by means of a bank memo (or bank advice). Bank debit advice – bank document informing the business of a decrease of the bank account. (via Bank Memo) e.g. interest charge and service charge Bank credit advice – bank document informing the business of a increase of the bank account. (via Bank Memo) e.g. interest earned

Bank Memo Fig 6.11 (P191) shows an example of bank debit advice. Journal Entry for a Bank debit advice from Fig 6.11 Dr Cr Interest Expense 113.50 Bank 113.50 Paid interest for bank loan - bank memo#564

Bank Memo If you leave a lot of money in your bank account, (such as $10,000) then the bank give you some money for it. (such as $10) This is called interest income for the business. If your business bank account earned interest, then you would just find it in the bank statement (usually once a month) Journal Entry for this is: Dr Cr Bank 3.20 Interest earned (Rev) 3.20

Classwork / Homework Review Questions: #20 and 21(P193) P195 EX 2 and Ex 3 P215 #2 I took up P195 EX #3 before the bell.