4. Source document

Question 1

Why business use source documents, support your answer with the support of accounting concept.

Answer 1

Objectivity theory:
Accounting information recorded must be supported by reliable and verifiable evidence so that financial statements will be free from opinions and biases. Hence business use source document as it provide object evidence of the transaction that has taken place.

Question 2

When to use invoice?

Answer 2

When there is a credit transaction.

Question 3

What does “sent invoice” mean? What is the double entries?

Answer 3

Business sold assets on credit.

E.g Business sold goods on credits
Dr Trade receivable (+) selling price
Cr Sales revenue (+) selling price

Question 4

What does “received invoice” mean? What is the double entries?

Answer 4

Business bought assets on credit.

E.g Business bought goods on credits
Dr Inventory (+) cost price
Cr Trade payable(+) selling price

Question 5

When to use credit note?

Answer 5

When there is a return of goods or overcharged in the invoice.

Question 6

What does “sent credit note” mean? What is the double entries?

Answer 6

1. Customer returned goods to business
   Dr Sales returned (+) selling price
   Cr Trade receivable (-) Selling price
2. Customer was overcharged.
   Dr Sales revenue (-) amount to deduct
   Cr Trade receivable (-) amount to deduct

Question 7

What does “received credit note” mean? What is the double entries?

Answer 7

1. Business returned goods to credit supplier
Dr Trade payable (-)
Cr   Inventory (-) 

2. Business was overcharged.
Dr Trade payable (-)   amount to deduct
Cr   Inventory (-)         amount to deduct

Question 8

When to use debit note?

Answer 8

When there is an undercharged in the invoice.

Question 9

What does “sent debit note” mean? What is the double entries?

Answer 9

Customer was undercharged.
Dr Trade receivable (+) amount to add
Cr Sales revenue (+) amount to add

Question 10

What does “received debit note” mean? What is the double entries?

Answer 10

2. Business was undercharged.
Dr Inventory (+)                  amount to add
Cr   Trade payable (+)        amount to add

Question 11

When to use receipt?

Answer 11

When business received money by cash or cheque.

Question 12

When to use payment voucher?

Answer 12

When business paid money by cash or cheque.

Question 13

When to use remittance advice?

Answer 13

When business paid money to trade payable.

Question 14

When to use bank statement?

Answer 14

When there are

1. dishonored cheque
2. bank charges
3. interest on deposit
4. bank transfer