Chapter 2 Flashcards
What are the 2 types of monetary transactions and what is the main difference between them?
Cash transactions and credit transactions. In cash transactions, payment is made/received immediately while in credit transactions, payment is made/received at a later date.
What are the 4 stages of the accounting cycle and how often are they supposed to be carried out?
- Identify and record - daily
- Adjust - at least once a financial year
- Report - at least once a financial year
- Close - once at the end of the financial year
What does a source document provide?
A source document provides evidence to capture occurrence of a transaction. (The transaction is recorded at the original cost that it occurred.)
What are the types of source documents? (6)
Receipt, remittance advice, invoice, credit note, debit note, payment voucher
What is the purpose of a receipt?
It acknowledges payment received from customers immediately after the business has sold goods or provided services.
What is the purpose of a remittance advice?
A remittance advice informs credit supplier that payment by cheque has been made for a specific invoice.
What is the purpose of a invoice?
An invoice informs credit customers of the amount owed after the business sold goods or provided services on credit.
What is the purpose of a credit note?
A credit note reduces the amount owed by credit customers:
- who were previously overcharged; or
- after goods were returned
What is the purpose of a debit note?
A debit note increases the amount owed by credit customers who were previously undercharged.
What is the purpose of a payment voucher?
A payment voucher processes payment to credit suppliers:
- must be approved by authorised personnel; and
- must be supported by original supplier’s invoice
What is the purpose of a bank statement?
A bank statement checks and tallies against the business records of its cash at bank account.
