SOURCE DOCUMENTS AND BOOKS OF ORGINAL ENTRY

Definition and Purpose

A book of original entry is a book of record in which transactions are recorded as they occur on a daily basis and in a chronological order, before they are posted to the relevant accounts in the ledger. These books are also known as books of prime entry as
transactions are first recorded in them before they are posted to the accounts in the ledger. Information from source documents is first recorded in such books before being posted to the ledger. These books act as aid to the ledger in respect of certain transactions which
cannot be posted directly to the ledger. They are minor or subsidiary to the ledger which remains the main book of account.

Source Documents
This shows the evidence transactions. They are collected, filled and posted in the books of prime entry. Example, if a firm sells goods on credit, then an invoice is raised. The source documents as shown in the above include:

  1. Sales invoice
  2. Purchases invoice
  3. Credit note
  4. Debit note
  5. Receipts, cheques and petty cash vouchers
  6. Other correspondences.

1.Sales Invoice
The sales invoice is raised by the firm and sent to the debtor/ customer when the firm makes a credit sale.
The sales invoice contains the following:

  • Name and address of the firm
  • Name and address of the buying
  • Date of making the sale – invoice date
  • Invoice number
  • Amount due (net of trade discount)
  • Description of goods sold
  • Terms of sale

2.Purchases Invoice

A purchase invoice is raised by the creditor and sent to the firm when the firm makes a credit purchase  It shows the following:

  • Name and the address of the creditor/Seller
  • Name and address of the firm
  •  Date of the purchase (invoice d
  • Invoice number
  • Amount due
  • Description of goods sold
  • Terms of sale

3. A credit note
A credit note is raised by the firm and issued to the debtor when the debtor returns some goods back to the firm. It’s contents include:

  • Name and address of the firm
  •  Name and address of the debtor
  • Amount of credit
  • Credit note number
  • Reason for credit e.g if goods sent but of the wrong type

The purpose of the credit note is to inform the debtor or customer that the debtor’s  account with the firm has been credited i.e. the amount due to the firm has been reduced or cancelled.
The credit note may also be issued when the firm gives an allowance of the amounts due  from the debtors. From the context we can assume that all credit notes are issued when goods are returned.

4. Debit note

This is raised by the creditor and issued to the firm when the firm returns some goods to the creditor. It includes the following items:

  • Name and address of the firm
  • Name and address of the credit
  • Amount of debit
  •  Debit Note number
  • Reason for the debit
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