1. Chapter 4 Unit 8 Notes Mrs. Joudrey

2. A Source Document • A Source Document is any business form that serves as the original source of information that a transaction has occurred. • It’s a concrete object that proves that a transaction has actually occurred. It is usually prepared with at least two copies so each party gets a copy (example: seller and buyer)

3. An example of a source document is a SALES SLIP. • A Sales Slip is prepared for all cash sales by a business. Three copies are prepared for cash sales slips. • Copy 1: given to the customer • Copy 2: used by accounting to record transaction • Copy 3: Kept in numerical order in a file as a record.

4. A Sales Slip

5. A Sales Slip • This is the entry that is made by the seller (the company who did the painting services) using copy 2:

6. A Sales Slip • The buyer’s accountant uses copy 1 to enter this transaction:

7. Sales Invoices are another example of a Source Document • A Sales Invoice is the bill completed by the seller and given to the buyer as a record of a credit sale. It’s the bill that records credit sales (where the customer pays at a later date). • So if ABC company had landscaping co. come in to put down sods for $500 and they wanted to pay at a later date landscaping co. would create a sales invoice and……

8. Sales Invoices are another example of a Source Document • Copies 1 and 2 would go to the customer (ABC company) • Copy 3: they would keep and give to their accounting department to record the transactions • Copy 4: Kept by the sales department as a record of the sale.

9. ABC Company Would Record:

10. Landscaping Co. Would Record:

11. Purchase Invoices • Purchase invoice is the bill received as proof of a purchase on account. • To the seller, Landscaping Co., this is a Sales Invoice. • To the buyer, ABC Company, this is a Purchase Invoice.

12. Net 30 days • When a company buys something on credit there are terms set out for re-payment at the time of purchase. • We will typically see net 30 days – this means that the amount is due in 30 days. • What does net 60 days mean?

13. Cheques

14. Cheques • Cheques written by a business have two parts - the above part (the actual cheque) and the bottom part that is detached before the cheque goes to the bank to be cashed. • That bottom part is what accountants use to record the transaction.

15. Source Documents are Pre-numbered • They already have numbers on them (in sequence) and every one needs to be accounted for. • They are already numbered to prevent errors and losses due to theft and the use of false documents. • They must be kept on file.

16. Assignment • Please complete question 19 and 20 with the person beside you. You should both write down the answers so you have records of it.