Chapter 6: Source Documents

Question 1

Single Entry Accounting

Answer 1

A simple accounting system in which one entry is made in the accounting records for each transaction that occurs.

Question 2

Cash Journals

Answer 2

A single-entry accounting system which consists of two records known as cash journals. These cash journals are multi-column records that show details of all cash receipts and cash payments over a period.

Question 3

How are the columns of Cash journals determined

Answer 3

Those items that occur regularly (possibly daily) will get their own classification column, whilst those that occur infrequently (possibly once a month) will be classified in the Sundries column.

Question 4

Function of Sundries

Answer 4

Used to record details of the business’ infrequent transactions

Question 5

Source documents

Answer 5

Source documents are business documents that provide both the evidence that a transaction has occurred and the details of the transaction itself.

These are used to create business records and reports

Question 6

GST

Answer 6

A 10% tax on sales of goods and services.

Question 7

Cash receipts

Answer 7

A cash receipt is a transaction that occurs when cash is received from another entity

All cash received must be evidenced by a cash receipt (hand-written or generated electronically)

Question 8

What must a Cash receipt specify (DARNI)

Answer 8

-Date of the transaction
-Amount received
-Reason for the receipt of the cash
-Numbered for easy and accurate identification
-It must contain all the information necessary to account for the GST

Question 9

EFTPOS Receipts

Answer 9

A document created by an EFTPOS terminal when a customer has paid by a credit card, debit card or gift card.

Question 10

Explain why GST paid to suppliers reduces the GST liability

Answer 10

If a business has paid GST to its suppliers, it is allowed to deduct this from the GST it owes. It then reduces their GST liability, meaning they will owe less money to the ATO)

Question 11

Cheque butt

Answer 11

A document used to verify the details of cash payments made by cheque.

The cheque butt provides all the details required about cash payments and is completed at the same time as the cheque is written out.

Question 12

EFT Payment

Answer 12

a payment made online that transfers cash funds from one business to another

Question 13

Invoice

Answer 13

a document used to verify that either a credit sale or a credit purchase has taken place.

The invoice is the evidence of a sale with a promise to pay at a later date.

Question 14

What 5 things must an Invoice always state (NDDIG)

Answer 14

The credit terms (when the amount must be repaid)

1. Name of the customer (to allow the business to keep track of all their credit customers and how much each of them owes at a particular date)
2. Date of the transaction
3. Details of the transaction
4. Invoice number
5. GST information necessary for it to be classified as a tax invoice

Question 15

Credit note

Answer 15

A document that evidences a reduction in the amount owed by a customer.

Can be issued for:

-return of goods due to damage, wrong specifications

Incorrect price or quantity on original sales invoice

A sales discount was not applied

Question 16

Credit note Mechanics

Answer 16

A credit note has a negative effect against an invoiced amount owing (reduces the amount a business is to be repaid)

Question 17

Memos

Answer 17

A source document used to verify internal transactions.

Question 18

Purchase orders

Answer 18

A document used to confirm a request to a supplier to provide goods or services

Question 19

5 features of a Purchase Order (DQD)

Answer 19

1. Description of the goods required
2. The quantity
3. Delivery date

Question 20

Delivery dockets

Answer 20

A document used to verify that the goods received are the goods ordered

Question 21

2 Features of a delivery docket

Answer 21

1. Description of the goods
2. Quantity supplied

Question 22

Statement of Account

Answer 22

A document that informs a business’ customers of all transactions over the previous month

Question 23

Bank Statement

Answer 23

A statement provided to customers by their banking institution that gives details of all cash transactions relevant to that particular account that have occurred over a specific period of time and the resulting balance at the end of that period

Question 24

Drawee

Answer 24

The financial institution or bank of the drawer

Question 25

Drawer

Answer 25

The entity writing the cheque

Question 26

Payee

Answer 26

The entity that is receiving the cheque or to whom the cheque is written

Question 27

Non negotiable

Answer 27

A control mechanism that ensures that the cheque can only be deposited into the account of the nominated payee

Question 28

Shipping and Order confirmation

Answer 28

A document that indicates that an order has been dispatched(sent) and can be expected at some point

Question 29

Why are there no prices on a delivery docket

Answer 29

The delivery docket is not used for tax purposes so does not require information such as prices and tax information