6.2 Source Documents Pg. 175
Source Documents: A business paper that shows the nature of a transaction and provides all of
the information needed to account for it properly.
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
Source documents are used by accounting department as the basis for recording the accounting
entries.
Almost every accounting entry is based on a source document
IF THERE ARE NO CONVENTIONAL SOURCE DOCUMENTS, (EX. OWNER’S WITHDRAWING $ FOR
PERSONAL USE) THE ACCOUNTING ENTRY THEN MUST BE SUPPORTED BY SOME OTHER BUSINESS
PAPER IN RECORD. THE SUPPORTING DOCUMENTS MIGHT BE:
1. detailed calculations prepared by the accounting department
2. A document drawn up years ago (Ex. A long-term rental agreement), covering a series of
transactions, including the current date.
Cash Sales Slip
pg.176
Cash sales slip: A business form showing the details of a transaction in which goods or services
are sold to a customer for cash.
Ex. Journal Entry for a Cash Sales Slip:
The accounting copy goes to the accounting department as the source document for the journal
entry. For the above sales slip, the journal entry is:
DR
$ 35.90
Bank
Sales
Sales Invoice
CR
$35.90
A similar journal entry will be made for all cash sales slips.
pg.177
For business that does not deal with the general public and therefore normally do not have cash
sales, make nearly al their sales on account. For each sale on account, a sales invoice is issued to the
customer.
Sales Invoice: A business form showing the details of a transaction in which goods for services
are sold on account. Usually, there is an original and several copies.
Party that sells -> the Vendor
Party that buys -> the purchaser
Ex. Journal Entry for a Sales Invoice:
The accounting copy goes to the accounting department as the source document for the journal entry
to record the sale. For this sales invoice, the journal entry is:
DR
CR
A/R – S. & S. Boatworks
$835.70
Sales
$835.70
A similar journal entry will be made for all sales invoices.
Dual Purpose Sales Slip:
pg.178
Some businesses dealing with the general public do business both for cash and on account. There is a
business form that will handle both types of transaction:
Dual-purpose sales slip: A business form showing the details of a transaction in which goods or
services are sold either for cash or on account.
Ex. Journal Entry for a Dual Purpose Sales Slip:
The journal entry for the source documents shown above is:
DR
$65.00
A/R – B. Harper
Sales
If the cash box had been checked off, the journal entry would have been:
DR
Bank
$65.00
Sales
Purchase Invoice:
CR
$65.00
CR
$65.00
pg.179
A purchase invoice is a business form representing a purchase of goods or services on account.
It is the name used in office of the purchaser to differentiate between its own sales invoices and
those of its suppliers.
Ex. Journal Entries for Purchase Invoices:
Masthead Marine buys a variety of goods and services from numerous suppliers. No single journal
entry will do for all of the different items purchased. The account debited – depends on what
particular goods or services are purchased. Account credited – always be the same, accounts payable.
DR
CR
Equipment Repairs
$241.50
A/P – General Engineering
$241.50
The journal entry for the purchase invoice for the second figure is:
DR
CR
Advertising Expense
$240.00
A/P – Coleman Posters
$240.00
The above entries show clearly that:
 The account debited depends on the nature of the goods or services purchased
 The account credited is always an account payable.
Cheque Copies:
A
pg.181
cheque copy is a document supporting the accounting entry for a payment by cheque.
Cheque may be issued for: cash purchases, wages, owner’s withdrawals, payments on account, etc.
Journal Entry for a Cheque Copy:
The accounting department copy is sent to the accounting department where it is used as the source
document for the transaction. The debit part of the journal entry depends on the nature of the
transaction. The credit part of the journal entry is always to Bank. For this particular cheque copy,
the journal entry is:
DR
CR
A/P – Sterling Spars
$1 802.90
Bank
$1 802.90
Cash Receipts Daily Summary:
Everyday in business, cheque or cash are received from customers who are referred to as the “cash
receipts”. Cheque then must be deposited in the bank and cannot be kept to support the accounting
entries. Therefore, mail clerk or employee prepares a list of the cash receipts before making the
deposit.
Cash receipts daily summary: a business paper that lists the money coming in from customers.
The cash receipt list is the source document for the accounting entries for cash receipts.
A
Remittance advice: is a form accompanying the cheque explaining the payment.
Journal Entry for a Cash Receipts Daily Summary:
The original list goes to the accounting department as the source document for the accounting entry.
For the cash receipts list above, the journal entry is:
DR
CR
Bank
$2 142.24
A/R – A. Baldwin
$375.02
A/R – F. Perri
$965.50
A/R – Pier 10 Marina
$801.72
Bank Advices:
Bank Debit Advice: a bank document informing the business of a decrease made in the business’s
bank account.
Bank credit advice: a bank document informing the business of an increase made in the
business’s bank account.
Journal Entry for a Bank Advice:
The bank advice goes to the accounting department as the source document for the journal entry.
IN this case, the journal entry is:
DR
CR
Bank Charges and Interest
$113.50
Bank
$113.50
GAAP – The Cost Principle:
The cost principle states that the accounting for purchases
must be at the cost price to the purchaser.
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The value recorded in the accounts for an asset is not changed later if the market value for the
asset changes. It would take an entirely new transaction based on new objective evidence to
change the original value of an asset.