5. Source document Flashcards
What is a source document?
A source document is the original written document that provides details and evidence of the transaction that has taken place.
Why business use source documents, support your answer with the support of accounting theory.
This is in accordance to objectivity theory which state that 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 provides objective evidence of the transaction that has taken place.
When to use invoice?
When there is a credit transaction.
What does “sent invoice” mean? What is the double entries?
Business sold assets on credit.
E.g Business sold goods on credits
Dr Trade receivable (+) selling price
Cr Sales revenue (+) selling price
What does “received invoice” mean? What is the double entries?
Business bought assets on credit.
E.g Business bought goods on credits
Dr Inventory (+) cost price
Cr Trade payable(+) cost price
When to use credit note?
When there is a return of goods or overcharged in the invoice.
What does “sent credit note” mean? What is the double entries?
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
What does “received credit note” mean? What is the double entries?
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
When to use debit note?
When there is an undercharged in the invoice.
What does “sent debit note” mean? What is the double entries?
Customer was undercharged.
Dr Trade receivable (+) amount to add
Cr Sales revenue (+) amount to add
What does “received debit note” mean? What is the double entries?
Business was undercharged by supplier.
Dr Inventory (+) amount to add
Cr Trade payable (+) amount to add
When to use receipt?
When business received money by cash or cheque.
When to use payment voucher?
When business paid money by cash or cheque.
When to use remittance advice?
When business paid amount owed to trade payable (supplier).
When to use bank statement?
When there are
- dishonored cheque
- bank charges
- interest on deposit
- bank transfer
