Accounting 3 - The role of source documents Flashcards
What are sources documents?
Documents that provide both the evidence that a transaction has occurred and the details of the transaction itself.
What are some types of sources documents?
- Receipts (receiving money)
-Cheque Butts - Invoices
- Credit Notes
Memos - Bank statement
What information must be shown on a source document that includes GST?
- The name of the seller
- The Australian Business Number (ABN)
- The date of the transaction
- Must state “tax invoice”
- Describe of good/services provided
- Price (including GST)
A cash receipt refers to?
refers to both the transaction that occurs when cash is received from another entity, as well as the source document that verifies that transaction.
Cash receipts must specify?
The date of the transaction, the amount received, and the reason for the receipt of the cash.
What is a cheque butt used to verify?
Cash Payments (also a great way to see record keeping)
3 reasons why cash payments should be made by cheque?
- It means the owner isn’t carrying around large amounts of cash
- Cheques can be traces to identify the business or individual who deposited the funds into their account
- Provides (verifiable) evidence of transaction
What is a drawee?
The financial institution or bank of the drawer (payer)
Who is the drawer?
The entity writing the cheque
Who is the payee?
The entity that is receiving the cheque or to whom cheque is written.
Why should Cheques be non-negotiable?
It ensures the cheque can only be deposited into the account of the nominated payee.
The source document used to verify credit transactions
An invoice is used to verify a credit transaction.
What is the document for a credit sale?
Sales Invoice
What is the document for a credit purchase?
Purchase Invoice
Explain the purpose of a memo
Issued for transactions that cannot be evidenced by any other source document, can also be used to verify internal transactions.
