Unit 3 : Chapter 6
The Journal and Source Documents
•Chapter 6 Quiz will be on October 24 (Friday)
1
Transactions
occur.
4 Trial
Balance
2 Transactions
are recorded in
the journal in
order by date.
5 Adjusting
Entry
3 The
accounting
entries are
transferred to
the ledger
accounts. (or T
accounts)
6 Balance
Sheet and
Income
Statement
•When a bookkeeper first records the journal
entry, they have to read and interpret the
information in source documents. (More than
90% of journal entries are made from source
document)
• Some business transactions are started by
non-accounting people such as owner, salespeople, department supervisors, managers
and other authorized people.
There are many types of source documents :
1. Cash Sales slip
2. Sales Invoice
3. Point of Sale Summaries
4. Purchase Invoice
5. Check copies
6. Cash Receipts Daily Summary
7. Bank Advices or (Bank Memo)
•People use credit cards and debit cards to
pay for items.
•A point of sale terminal is a computerized
sales register which allows a business and
its customers to exchange funds
electronically. (More details in chapter 9)
• At the end of each day, an accounting
clerk can use POS terminal to print POSS at
least two source documents.
•An example is Fig 6.6 Page 187
•You can see that PSS reveals the sales
activities of three cards: VISA, Master card
and debit cards.
•Journal Entry for POS summaries is:
Dr
Bank
Cr
743.18
Sales
POS summary Oct 30
743.18
Note: Cheque copy itself is not sufficient
proof that the payment is proper. A bill or
receipt is also needed to support the
accounting entry for a cash purchase.
Otherwise we have no idea what this
check is for.
Source
Document
Transaction
Description
Journal Entries
Debit
Credit
Cash Sales Slip
POS Summaries
A sale of goods (or
services) for cash.
Bank
Sales or
Revenue
Sales Invoice
A sale of goods (or
services) on account.
Accounts
Receivable
Sales or
Revenue
Purchase Invoice Company purchased
1. An expense
Accounts
goods (or services) on account (small
Payable
account
amount)
Few times an
asset account
(big amount) can
be debited. For
example,
machine
Source Document
Cheque Copy
(Company wrote
a cheque,
meaning
company paid
cash)
Transaction
Description
1. Paying off of an
account payable
2. Cash purchase of
an asset
3. Cash payment for
an expense
4. Owner draws out
money for personal
use
Cash Receipts
Cheques received
Daily Summary
from customers (who
(or check copies) purchased goods on
account in the past)
Journal Entries
Debit
Credit
1. A liability
account
2. An asset
account
3. An expense
account
4. Drawings
account
Bank
Bank
Accounts
Receivable
Source Document
Bank Debit
Advice (by
Bank
Statement)
Bank Credit
Advice (by
Bank
Statement)
Transaction
Description
Bank account
decrease
Bank account
increase because
company’s savings
acct earned
interest or
customer paid
back their debt by
online payment
Journal Entries
Debit
Interest
expense or
service
charge
Bank
Credit
Bank
Interest
earned
(Revenue),
or AR

In addition to the source documents
listed in previous slide, you may
encounter the following source
documents:
◦ Receipts such as donations
◦ Bills (=Invoice) such as hydro or
telephone charge
◦ Email invoices vs mail invoices
◦ Online banking transactions
◦ Insurance certificates

In addition to the source documents listed in
previous slide, you may encounter the
following source documents:
◦ Written memos from the owner
◦ Bank Statements – can contain most (if
not all) of these information in reality.
You have to learn how to read bank
statements.
◦ Cash register tapes



There is no fixed number of required copies
of business documents. It depends on the
business and the owner.
You would need to keep at least one copy of
the source document in general.
I will take up one or two questions from
yesterday.


Review Questions: #10 to #12, #14, 16 and
18 (P193)
Exercises #1, #4 and #5 (P193 and P195)