Chapter 6- Source Documents

Source Document (p. 165)  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 (GAAP, p. 173)  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 (GAAP, 3.1, p. 50)  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 Monthly Payments Cheque 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/PCR

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: BankDR 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:  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