SOURCE DOCUMENTS payment.

The one who received the payment prepares

A source document is a paper which provides information the receipt. The original or top copy is issued to the one
about a transaction that took place. It’s prepared as the who paid. What remains in the receipt book is the
transaction takes place, and it’s the source of information duplicate copy, which serves as the source document for
we record in bookkeeping. This document provides evidence a received payment.
that a transaction took place, and it’s also referred to as a
SUPPORTING DOCUMENT. 2) Till Slips: Preparing a receipt may be a long process,
depending on how many cash transactions the business
It confirms that the transaction actually took place and as makes. This process has been speeded up by Till
documentary evidence for credit and Cash transaction. Machines that are common in supermarkets. The item
Documents Includes Receipts, Till slips, Invoices, Debit notes, sild is identified by pressing a button, or the machine scan
Credit note, bank and credit card statement, cheque stubs, the information. It has the date already set, and it picks
deposit slips and others. up all the required information from its database storage.
Once its informed that the transaction is complete, it
All the information we record in bookkeeping should come quickly generates the totals, accepts the paid amount,
from a document. Therefore, all transactions should have a calculates the balance, and quickly prints out the slip. The
document supporting them. When there is need for further information contained on a till slip is not much different
clarification about a transaction, we check the document from a hand written receipt. As source documents in
indicated in the reference column. This is often done by Tax bookkeeping, they are treated in exactly the same way.
officials and Auditors.
3) Cheque: This is a document used to withdraw money
It’s a legal requirement that all source documents are stored from a bank current account. It instructs the bank to pay
for 6 years after the end of the financial year. This implies a particular amount to the one written on it. The bank to
they may be required by Tax officials within that period, for pay is printed at the top of the cheque. Once a cheque
verification or investigation purposes. leaflet is torn out of the cheque book, the part that
remains is the Cheque Stub or Counter Foil. This serves
1) RECEIPT: A receipt is a document prepared when a seller as the source document because what is written on the
receives payment from a buyer. It confirms and proves

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 cheque leaflet is also written on it for documentation
purposes. 6) Payment Voucher: This is a document prepared before a
payment is authorized. An invoice or quotation for what
Parties to a cheque are the people or institutions affected is being paid for is attached and checked before
by a cheque and they are; authorizing and signing the voucher. If payment is to be
Drawer: This is the owner of the cheque who also is the made using cash, then a PETTY CASH VOUCHER is
account holder with the bank. prepared. If payment is by cheque then a BANK
Drawee: This is the bank itself authorized to pay the said PAYMENT VOUCHER is prepared. Or it may be combined
amount on the cheque to the bearer. into a payment voucher for such purpose.
Payee: This is the one who receives the money indicated
on the cheque, or the one being paid. If an individual 7) Invoice: An invoice is a document issued by a seller to a
withdraw from his account, he is both the drawer and buyer when goods are sold on credit. It usually contains
Payee. an abbreviation “E.&O.E.” meaning, “Errors and
Omissions Excepted”. This gives the seller the right to
4) Cash Register Tape: A cash register is a machine that is correct any clerical errors arising from the omission of an
used for calculations and printing of cash transaction item or an incorrect addition.
details. You must have seen one at the pay point of Mr. When a business sells on credit, it issues the original top
Biggs, Tasty Fried Chicken, Tantalisers, Park ‘n’ Shop and copy to the buyer, and it retains a copy. This is also known
other big stores. The printed paper that comes out of the as a Sales Invoice. When a business buys on credit, it
machine is the Cash Register Tape. receives the original top copy of the invoice. This is also
known as a Purchases Invoice. An invoice issued by a
5) Deposit Slip: To deposit is to take money to the bank. A seller, turns out to be an invoice received to a buyer.
deposit slip is a document we fill in when we take cash
and cheque to the bank. When the bank receives it, it 8) Proforma Invoice: It is a document sent by a seller to a
stamps to confirm it received the money. This document buyer when asking for payment in advance. This is sent
is also known as a Pay-in Slip. The source document for when the seller does not want to sell to the buyer on
money deposited on a bank account is the Stamped credit. This is equivalent to a cash transaction.
Deposit Slip.

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9) Debit Note: This is a document sent by a seller to a credit They are called day books because they need to be updated
buyer, when there was an undercharge on a previous daily. Journals are also called books of original entry or
invoice. An undercharge is when the amount charged is books of prime entry.
less than what it was supposed to be. Journals do not follow the principle of double entry which
It could be due to a mistake in calculations, writing a states that, “for every debit entry, there must be a
lower amount than the actual price, or omission of an corresponding credit and vice versa”.
item on the invoice. This under charge can also be
corrected by sending another invoice along with the debit Types of Journals
note. This is only used in circumstances of credit The following are types of journal;
transactions. 1) Sales Journal
2) Purchase Journal
10) Credit Note: This is a document sent by a seller to a 3) Returns Outwards Journal
credit buyer, aimed at reducing the amount indicated on 4) Returns Inwards Journal
a previous invoice. The amount is reduced because the 5) Cashbook
buyer had been over charged, or they returned some of 6) General Journal
the goods bought. An overcharge is an error where a
buyer is charged more than what they should pay. This 1) Sales Journal: This is also called sales day book. It is a
document is usually printed in RED. book of prime entry where goods and services sold on
credit are recorded. Note that cash transactions are not
11) Statement of account: This is a document sent by a recorded in the sales journal.
seller to a debtor, showing transactions which took place
between them in the previous month, and also serves as 2) Purchases Journal: This is also called purchases day book.
a reminder for payment. This is the day book in which daily credit purchases are
recorded. Cash purchases are not recorded in the
JOURNALS purchases journal.
These are books in which information from source
documents is first recorded before being transferred to the 3) Returns Inwards Journal: This is also called a sales
principal books of account. returns book. This is the day book used for recording

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 details of goods brought back by customers due to one 1) Debit the Receiver and
reason or another. E.g. wrong size, colour or quantity. 2) Credit the Giver.
4) Return Outwards Journal: This is also called the
purchases return book. This the book day book in which There are 3 question you must ask and answer before you
details of goods sent back to suppliers are recorded. record a transaction.
1) Which 2 accounts are involved?
2) Which account is giving value?
5) Cashbook: This is the day book that is used to record all
3) Which account is receiving value?
cash and bank transaction.
When answered correctly, one can go ahead and record the
6) General Journal: This journal is used for recording details transactions appropriately.
of fixed assets sold or bought; and for correcting errors
made in bookkeeping. LEDGERS
This is a special book because it is both a journal and a A ledger is simply a book that contains several accounts
ledger. It is a journal because original entries are made in divided into sections. The ledger is the final resting place for
it and these entries can be made daily. It is a ledger all transactions in the Journal. It is the principal book of
because it is an account where cash and /or bank account where all accounts fall under and therefore a very
transactions are recorded. important book.

The Life Cycle of any Transaction

DOUBLE ENTRY BOOKKEEPING
Source Document → Journals → Ledgers
Principle of Double Entry:
This is a very important principle in bookkeeping. It states
FORMAT OF A LEDGER
that,
The ledger is divided into 2 parts namely, the debit side and
“for every debit entry there must be a corresponding credit
the credit side as shown below.
entry, and vice versa”.
All transactions must be treated twice, first on the debit side
of one account and then on the credit side of another
account.

The Golden rule states that

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Date Particulars L/F Amount Date Particulars L/F Amount
3) PRIVATE ACCOUNT
I. Capital Account: This account records the amount of
money which the owner has invested into the
business.
II. Drawings Account: This account records the
withdrawals made by the owner of the business
***L/F stands for LEDGER FOLIO or PAGE NUMBER either in cash or goods.

CLASSIFICATION (TYPES) OF LEDGERS (ACCOUNT)

1) PERSONAL ACCOUNTS: These are account that records
personal transactions of customers and organizations.
It’s divided into 2 parts namely:
I. Debtors Account: A debtor is an entity that owes a
debt to another entity. The entity may be an
individual, a firm, a government, a company or other
legal person.
II. Creditors Account: It is an entity or institution to
whom money is owed.

2) IMPERSONAL ACCOUNT OR GENERAL LEDGERS

I. Real Account: This account contains records of
transactions in tangible form E.g. plants, machinery,
vehicle, furniture & fitting etc.
II. Nominal Account: This account contains records that
have no physical form. They are intangible in nature.
E.g. rent, profit or loss, insurance premium,
depreciation etc.