Source Documents

Source Documents

• The Accounting department of a business does not start the transactions that a business.

• Sales, the owner, supervisors, managers, all produce transactions.

• These people have to inform the accounting department that transactions have taken place.

Source Documents

• The information that Accounting employees use for their journals come from source documents.

• They explain the type of transaction and gives all the information needed to claim it.

• They must be kept on file. (Why do you think this is?)

Source Document (CASH SALES SLIP)

• These are business documents that give details of a transaction where goods or services are sold for cash.

• There is usually at least one copy.

Source Document (Cash Sales Slip)

• Journal entry for a Cash Sales Slip

• Dr CrBank 35.90 Sales 35.90

Source Document (Sales Invoice)

• A lot of businesses do not deal with the public.

• This means they do not have cash sales.

• What are their sales then?

Source Documents (Sales Invoice)

Source Document (Sales Invoice)

• The person or business selling is called the vendor. The one that is buying is called the purchaser.

• Journal entry for a Sales Invoice

• Dr

CrA/R - S. & S. Boatworks 835.70 Sales 835.70

Source Document (Point of Sale Summaries)

• More transactions than ever use plastic payment (Debit or credit cards).

• A Point of Sale (POS) Terminal is a cash register that lets a business and its customers exchange cash electronically.

• At the end of a business day, the account department prints two documents from the POS terminal. One is called the Host Reconcilliation/Card Summary.

• This gives sales information on that day.

Source Documents (Point of Sale Summaries)

• Called reconciliation because the business will compare the number at the bottom of this sheet with the bank statement at the end of the month.

• The second document is called a transaction log that gives information about each transaction.

• Customers name, card number. This is used for disputes.

• Journal entry for POS Summaries

• Dr CrBank 743.18 Sales 743.18

Source Document (Purchase Invoice)

• A purchase invoice is created when a business buys something from another business ON ACCOUNT.

Source Document (Purchase Invoice)

• Journal entry for a Purchase Invoice

• Dr CrEquipment Repairs 241.50 A/P – General Engineering 241.50

• Advertising Expense 240.00 A/P – Coleman Boats 240.00

Source Documents (Cheque Copies)

• A lot of business is still paid for with cheques.

• They are usually sent in the mail.

• They are usually used to pay for things purchased on account but can be used for bill paying, wages, drawings, etc.

Source Documents (Cheque Copies)

Source Documents (Cheque Copies)

• Sometimes, cheques are used to make cash payments.

• If this happens, you need a bill or receipt to prove you used a cheque.

• If the owner writes a cheque for himself, a copy of the cheque is good enough.

• Journal entry for cheque copies

• Dr CrA/P – Sterling Spars 1802.90 Bank 1802.90

Source Documents (Cash Receipts Daily Summaries)

• Business receive cheques as well. Called “cash receipts.”

• Cheques have to be deposited to the bank.

• A list must be prepared by whoever receives the cheques, of all the money coming in. It shows:-Who sent the money,-How much was sent (remittances)-What is was paying for.

Source Documents (Cash Receipts Daily Summaries)

• Journal entry for Cash Receipts Daily Summaries

• Dr CrBank 2,142.24 A/R – A. Baldwin

375.00 A/R – F. Perri

965.52 A/R – Pier 10 Marina 801.72

Source Documents (Bank Advices)

• Sometimes the bank makes changes to the bank account of a business.

• They let the business know with a bank advice.-Bank debit advices lets the business know about a decrease to the account.-Bank credit advices let the business know about an increase to the account.

Source Documents (Bank Advices)

• Journal entry for a bank advice

• Dr CrInterest Expense 113.50 Bank 113.50

Source Documents

Source Document

Transaction Description

Accounts Debited

Accounts Credited

Cash Sales Slip, POS summaries

Sale of goods/services for cash

Bank Sales or revenue

Sales invoice Sale of goods/services on account

A/R Sales or revenue

Purchase invoice Purchase of goods/services on account

Expense account or Asset account

A/P

Cheque copy 1.Paying an A/P2.Cash purchase of asset*3.Cash payment of expense*4. Owner drawing

1. Liability account2. Asset account (autos)3. Expense account4. Drawings

Bank

Cash receipts daily summary

Cheques received from customers on account

Bank A/R

Bank debit advice Bank account decrease

Interest expense or other account

Bank

Bank credit advice Bank account increase

Bank Interest earned or other account

* Must have a bill or receipt with it.

Additional Documents

• Receipts

• Bills (like phones, electricity, etc)

• Email invoices

• Online banking transactions with confirmation numbers.

• Insurance endorsement certificates

• Written memos from the owner

• Bank statements

• Cash register tapes (old)

Homework

• Page 193-196 Exercises #1-5.