6.2 Source Documents Accounting 11. Source Documents As you have learned from Ch. 6.1, transactions...
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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
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.
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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 2 parties.
Cant 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.
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How long does a business have to keep Source Documents??? Most
companies are required to keep documents for 3-7 years (depends on
areas tax laws). They are kept for reference purposes, for locating
errors, or proof of a transaction.
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Common Types of Source Documents 1.Cash Sales Slip 2.Sales
Invoice 3.Purchase Invoice 4.Cheque Copies 5.Cash Receipts Daily
Summary 6.Bank Advices
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For Our Example Assume you run a company named MASTHEAD
MARINE.
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Cash Sales Slip Is a business form showing details of a
transaction in which goods or services are sold to customer for
CASH.
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Sales Invoice Many businesses do not deal directly with the
general public & therefore do 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.
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Purchase Invoice Are receipts for when a company makes
purchases for goods/services. A company can purchase something in 2
ways: They pay Cash They pay on Account (A/P)
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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.
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Cheque Copies Cheques can be issued for many reasons: Cash
purchases Payment of Staff Wages/Salaries Owners 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
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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.
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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.
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2 Types of Bank Advices Bank Debit Advice a bank document
informing the business of a DECREASE made in the businesss bank
account. Bank Credit Advice a bank document informing the business
of an INCREASE made in the businesss bank account.
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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.
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Your Homework for Today Review Questions 1-25 on page 173
-174