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Introduction - Accounting Source Documents

You will have heard the term "double entry bookkeeping". This is an old established system of bookkeeping which forms the basis of all accounting systems. Today, of course, companies of all sizes usually use computerised accounting systems. Nevertheless, it is useful to learn a little about the double entry system as this will help you understand how a trial balance is drawn up.

Every "transaction" is supported by a business document. What do you understand by the term "transaction", and which documents are we talking about?

We have listed some of the most common transactions below. Most transactions are related to the sale or purchase of goods, services, capital items and consumables.

If you are a seller and make a sale: You produce an invoice. You send the top copy of the invoice to the buyer. You retain the second copy of the invoice

If you are a buyer and make a purchase The seller produces an invoice You receive the top copy of the invoice The seller retains the second copy of the invoice.

If you are a seller who has goods returned: You produce a credit note. You send the top copy of the credit note to the buyer. You retain the second copy of the credit note.

If you are a buyer who returns some goods The seller produces a credit note. You receive the top copy of the credit note. The seller retains the second copy of the credit note.

In this way everybody receives a document as a record of the transaction.

When purchasing capital items you will receive the top copy of the seller's invoice. In addition, you may also receive a deed (for premises) or a formal hire purchase agreement.

When purchasing small quantities of consumables or other small items the document you will receive could be the till receipt. Alternatively, the proprietor may make out and sign an internal petty cash voucher to release the money from the petty cash account.

Let's see if you can answer three easy questions.

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