Transcript Source Documents

Unit 8 – Source Documents
Source Document
• Is any business form that serves as the original
source of information that a transaction has
occurred.
• A source document must be prepared for every
business transaction.
– A concrete object that proves that a business
transaction did, in fact, occur.
– At least two copies: the seller and the buyer receive
an exact copy
Source Documents continued…
• Number of business transactions are started outside
the accounting department.
– Initiated by owner, sales-people, department heads,
managers, etc.
• Accounting departments informed of transactions
– Business papers sent to them = Source document
• Source Document: is a business paper that shows the
nature of a transaction and provides all of the
information needed to account for it properly.
Source Document continued…
• Almost every accounting entry should be
based on a source document.
• A company is required to keep source
documents on file.
– Used as reference purposes (locating errors)
– Factual evidence (verify transactions)
– Proof – records prepared accurately & honestly.
#1 – Cash Sales Slips
• is prepared for all cash
sales by a business.
• GST and PST shown on
example on page 136 –
will not be journalizing
and posting tax
amounts until later in
the book.
• Often generated by
sales clerk by hand.
Page 136 – Another Example
#1 – Cash Sales Slips Cont.
• Three copies are prepared. (original & two
copies)
– Copy 1: Given to the customer
– Copy 2: Accounting Department of seller (record
the transaction)
– Copy 3: Numerical file: record of all cash sales.
Example
Entry (Seller’s accountant) – Copy #2
- In actual practice, groups of sales slips would be combined and an entry similar to
the following one would be made to record the total of the group of slips.
General Journal
Date
May
Particulars
Page:
P.R.
Debit
21 Cash
Credit
46000
Sales
46000
Sales slip 43785
Entry (Buyer’s accountant) – Copy #1
General Journal
Date
May
Particulars
21 Maintenance Expense
Cash
Paid for painting services
Page:
P.R.
Debit
Credit
46000
46000
#2 – Sales Invoices
• is the bill completed by the
seller and given to the
buyer as a record of a credit
sale.
• Credit sale – one for which
the customer agrees to pay
at a later date.
• “Charge sale, “sale on
account”
• Often generated by a
computer
#2 – Sales Invoices Cont.
• Selling company makes several copies of the
invoice:
– Copies 1 & 2: Sent to the customer
– Copy 3: Accounting Department of seller (record
the transaction)
– Copy 4: Sales department (record of sale)
Example – Page 138-39
Entry (Buyer’s accountant) – Copy #1
General Journal
Date
Jun.
Particulars
1
Page:
P.R.
Debit
Consulting Services Expense
Credit
235400
Acc. Pay./Sanne Consulting
235400
Purchase Invoice 5870
Entry (Seller’s accountant) – Copy #3
General Journal
Date
Jun.
Particulars
1
Acc. Rec./Warrendon Sports
Consulting Revenue
Invoice 5870, consulting
services, net 30 days
Page:
P.R.
Debit
Credit
235400
235400
#3 – Purchase Invoices
- Is the bill received by
the purchaser as proof of
a purchase on account.
Example – Page 138-39
• Sanne consultants – Sales invoice (seller)
• Warrendon Sports Ltd. – Purchase invoice (buyer)
– Copies 1 and 2 are records of what Warrendon has
purchased and indicate how much is owed to the seller
General Journal
Date
Jun.
Particulars
1
Training Expense
Acc. Pay./Sanne Consulting
Purchased consulting
services, Invoice 5870, net 30
days.
Page:
P.R.
Debit
Credit
235400
235400
#4 – Cheques
• Cheques Issued: are issued to make cash
purchases and to pay bills.
• Original (sent to Sanne Consultants)
• Copy (kept by Warrendon Sports)
– Two Parts
• Cheque itself
• Attached portion (details on why cheque was written)
Example - Page 140
• Cheque copy used by Warrendon’s accountant
to record this entry:
General Journal
Date
Jun.
Particulars
30 Acc. Pay./Sanne Consultants
Cash
Issued Cheque 1624 to pay
Invoice 5870
Page:
P.R.
Debit
Credit
235400
235400
#4 – Cheques
• Cheques Received: are received as payments for amounts
owed or when customers buy something for cash.
• When received by Sanne Consultants.
– Cheque separated from record portion.
– Cheque endorsed with a restrictive endorsement (deposit only to
the account of Sanne Consultants)
– Immediately deposited in Sanne Consultants’ bank account
• Endorsement: the signature placed on the back of a cheque
by the person or company depositing the cheque.
• Restrictive Endorsement: is used to control with will happen
to the funds from the cheque.
Example – Page 140
• Record portion of the cheque is used to
prepare the following entry:
General Journal
Date
Jul.
Particulars
2
Cash
Acc. Receivable/Warr. Sports
Page:
P.R. Debit
Credit
235400
235400
Received Cheque 1624 for
Invoice 5870
• Companies that receive a large number of cheques – create
a list – cheques immediately deposited in the bank, list
used by the accountant to prepare the journal entries.
Bank Source Documents
• Bank credit memo – gives notice of an
increase in a customer’s bank account.
– Ex: Interest or other amounts are added to the
account
• Bank debit memo – gives notice of a decrease
in a customer’s bank account.
– Ex: Interest on a loan deducted from a company’s
account.
Other Source Document Facts
• Pre-numbered Source Documents
– Designed to prevent errors and losses due to theft or
to the use of false documents
– Are kept on file and must be made available to
persons who have the authority to check a company’s
records.
• Owners & managers of the business
• Outside accountants hired to check the records
• Federal income tax and GST personnel (Canada customs and
revenue agency)
• Provincial sales tax and Ministry of Labour personnel
• Court officials
Other Source Document Facts
• Source Documents – Evidence for Transactions
– Provide evidence that a transaction has actually
occurred.
– Company Accounting record checks
• Source documents (cash sales slips, sales invoices, and
purchase invoices provide proof that the transactions did
happen)
• Comparing source document copies of both seller and
buyer. (info should be the same)
The Principle of Objectivity
• Requires objective evidence to support the value
used to record transactions.
– Source documents help accountant satisfy this
principle. (provide verifiable evidence to support the
value placed on transactions)
** A company could overstate the value of its assets by
recording them at a high value.
- Company would appear more valuable than it
really is.
Summary
Source Document
Business Transaction
Cash sales slip
Bank debit memo
Bank credit memo
Sales invoice
Purchase invoice
Cheque issued
Cash sale to customer
Deduction from a company’s bank account
Increase in a company’s bank account
Sale on account to a customer
Purchase on account by the business
Payment made to a creditor (account payable) or for a
cash purchase
Payment received from a customer (account receivable)
Cheque received