3. Double Entry Model Flashcards
Describe source documents
They provide evidence of financial transactions – g/s being bought or sold, and money being paid or received.
Each sale, purchase, expense, receipt or payment will be recorded on one of these documents
Name the 8 types of source documents
Sales invoice
Purchase invoice
Credit notes
Cheque counter foils
Paying in slip counter foils
Cash receipts
Till rolls
Bank statement
Describe sales invoices
The doc that a seller gives to a buyer when supplying g/s on credit. It includes details of the g/s supplied and the amount to be paid
Describe purchase invoices
Received by the buyer when g/s are bought on credit. Each invoice is a sales invoice for the seller and purchase invoice for the buyer
Describe credit notes
Issues to show that goods have been returned and don’t need to be paid for . Goods may’ve been returned due to being damaged, faulty or not what was ordered.
Used by a business in 2 ways:
Sales returns
Purchase returns
Describe sales returns and purchase returns
SR- when goods have been returned by customers
PR- when goods received by the business have been returned to its suppliers
Describe cheque and paying in slip counterfoils
Counterfoils are the stubs at the start of cheques and paying in slips that remain in the cheque. When completing a cheque/PIS, the date , amount and details of the payee or amounts received are written on the counterfoils.
Cc- provide a record of money paid into the business
PISC- provide a record of cash and cheques banked by the business
Describe cash receipts
Receipts for g/s have been paid for at the time of purchase , whether by cash, cheques or debit card. These will often be small amounts for items like stationery
Describe till rolls
Amounts sold and paid for during a specific day and the total value of cash sales during the day. These sales are cash sales rather than cr sales as they’ve been immediately paid for.
These sale recorded on a full roll is the same purchase/expense that’s recorded on the cash receipt - cash receipt = source doc for buyer , till roll = Seller
Describe bank statements
Shows each individual receipt and payment to and from the bank account as well as the balance at a given date - sent to businesses by their banks
Common mistake - bank statement & cheque
A business will already have the details of details of cheque payments it’s made and the amounts it’s received and banked from cheque and paying in slips , so the bank statement is NOT a source doc for those items.
These BS is the source doc for payments and receipts that ARENT recorded on counterfoils : standing orders , dd, debit card transactions etc
Name the 6 books of prime entry
Sales journal
Purchase journal
Sales returns journal
Purchase returns journal
Cash book
General journal
Describe sales journal
B.o.p.e that lists the invoices for credit sales
Describe purchase journals
B.o.p.e that lists the invoices for credit purchases
Describe sales returns journal
B.o.p.e that lists the cr notes issued by the business
Describe purchase returns journal
B.o.p.e that lists the cr notes received by the business
Describe the cash book
B.o.p.e that is used to record. And receipts, bank payments, cash disc allowed and received
What is recorded on the left side of the 3 column cash book
A positive bank balance at the start of the month
Amounts received by the business (e.g payments from customers)
Cash discounts allowed to cycles who’ve paid promptly
What is recorded on the right side of the cash book
A negative bank balance at the start of the month
Amounts paid by the business (e.g to its suppliers for goods received )
Cash discounts allowed received from suppliers for prompt payment
Describe general journals
B.o.p.e that is used to record non-routine transactions
Describe what is found in the receivables ledger
Incl T accounts for each credit customer. Each of these customer accounts will show invoices, cr notes, payments , discounts and the amount owned by that customer
Describe what is found in the payables ledger
Incl T- account for each cr supplier. Each supplier account will show invoices, cr notes, payments, discounts and the amount owed to that supplier
Describe what is found in the general ledger
Incl T-accounts for every item that will appear in the financial statements e.g revenue , purchases, expenses , assets and liabilities, drawings and capital
