Accounting 11 PPT source documents

6.2 Source Documents Accounting 11 Source Documents • As you have learned from Ch 6.1, transactions are first recorded by accounting personnel as journal entries • But where is the information obtained? • Bills • Customer Receipts • Purchases or Sales Invoices etc… • These papers are the records used by accountants to record transactions Definition of Source Document • Are papers/records that shows the nature of a transaction & provides all information needed to account for a transaction done by a business • Has to be something tangible (able to touch) & shows a contract between parties • Can’t be an I.O.U on a dinner napkin • Only exception is when there is an internal business dealing within a company • Ex Owner withdraws money • There still needs to be some type of paper record How long does a business have to keep Source Documents??? • Most companies are required to keep documents for 3-7 years (depends on area’s tax laws) • They are kept for reference purposes, for locating errors, or proof of a transaction Common Types of Source Documents Cash Sales Slip Sales Invoice Purchase Invoice Cheque Copies Cash Receipts Daily Summary Bank Advices For Our Example • Assume you run a company named MASTHEAD MARINE Cash Sales Slip • Is a business form showing details of a transaction in which goods or services are sold to customer for CASH Title • Lorem ipsum dolor sit amet, consectetuer adipiscing elit Vivamus et magna Fusce sed sem sed magna suscipit egestas • Lorem ipsum dolor sit amet, consectetuer adipiscing elit Vivamus et magna Fusce sed sem sed magna suscipit egestas Sales Invoice • Many businesses not deal directly with the general public & therefore not normally have cash sales • These types of businesses usually make all their sales on account (A/R) • For these types of transactions a Sales Invoice document will be used instead of a Cash Sales Slip Purchase Invoice • Are receipts for when a company makes purchases for goods/services • A company can purchase something in ways: – They pay Cash – They pay on Account (A/P) Cheque Copies • For most businesses, the most common method of making payments is by issuing a company cheque • The reason this is done is because cheques leave a ‘paper trail’ or record of transaction • A CHEQUE COPY is a document supporting the accounting entry for a payment by cheque Cheque Copies • Cheques can be issued for many reasons: – Cash purchases – Payment of Staff Wages/Salaries – Owner’s Withdrawals – Payments on accounts for Purchase Invoices – Etc… • A cheque by itself is NOT sufficient proof of a transaction, it must be accompanied with a receipt to prove purchase/payment Cash Receipts Daily Summary (Definition) • Is a business paper that lists the money coming in each day from their customers • This document shows: – Names of Customers – Dollar Amounts – What is being paid for in each case Bank Advices • There will be times when your Bank automatically initiates a change in your bank account or the business bank account • The bank must legally inform you of this by sending you a document called a Bank Advice 2 Types of Bank Advices • Bank Debit Advice – a bank document informing the business of a DECREASE made in the business’s bank account • Bank Credit Advice – a bank document informing the business of an INCREASE made in the business’s bank account Title • Lorem ipsum dolor sit amet, consectetuer adipiscing elit Vivamus et magna Fusce sed sem sed magna suscipit egestas • Lorem ipsum dolor sit amet, consectetuer adipiscing elit Vivamus et magna Fusce sed sem sed magna suscipit egestas GAAP – COST PRINCIPLE • States that the accounting for purchases must be at the cost price to the purchaser • You cannot change the value of an asset if it becomes more/less value after you purchase it • You record it on your books at the price you paid for it Your Homework for Today • Review Questions 1-25 on page 173 -174 [...]... common method of making payments is by issuing a company cheque • The reason this is done is because cheques leave a ‘paper trail’ or record of transaction • A CHEQUE COPY is a document supporting the accounting entry for a payment by cheque Cheque Copies • Cheques can be issued for many reasons: – Cash purchases – Payment of Staff Wages/Salaries – Owner’s Withdrawals – Payments on accounts for Purchase... magna Fusce sed sem sed magna suscipit egestas • Lorem ipsum dolor sit amet, consectetuer adipiscing elit Vivamus et magna Fusce sed sem sed magna suscipit egestas GAAP – COST PRINCIPLE • States that the accounting for purchases must be at the cost price to the purchaser • You cannot change the value of an asset if it becomes more/less value after you purchase it • You record it on your books at the price .. .Source Documents • As you have learned from Ch 6.1, transactions are first recorded by accounting personnel as journal entries • But where... be some type of paper record How long does a business have to keep Source Documents? ?? • Most companies are required to keep documents for 3-7 years (depends on area’s tax laws) • They are kept... kept for reference purposes, for locating errors, or proof of a transaction Common Types of Source Documents Cash Sales Slip Sales Invoice Purchase Invoice Cheque Copies Cash Receipts Daily Summary