![]() (ii) The transaction involves an exchange or transfer of money or money’s worth such as goods or services. (i) There must be at least two parties to a transaction. In short the following three points are worth noting about business transactions: One party receives the benefit which the other party gives. The purchase and sale of goods for cash or on credit, the receipts and payments of cash etc., are termed as business transactions since these activities involve exchange of values between parties.Ī business transaction therefore results in some property, goods or services changing hands. A business transaction is a business activity involving the exchange of money and goods or services for money or for a right to collect money between accounting entities – person (natural and artificial) and which can be objectively measured. ![]() A supplier invoice also supports the recordation of an expense, inventory item, or fixed asset.Accounting Process is primarily concerned with the business transactions. Supplier invoice: This is also a source document that supports the issuance of a cash, cheque or electronic payment to a supplier.Sales order: This document, when coupled with a bill of lading and packing list, can be used to invoice a customer, which in turn generates a sale transaction.Packing slip: This describes the items shipped to a customer, and so supports the recordation of a sale transaction.Credit card receipt: This can be used as evidence for a disbursement of funds from petty cash.Bank statement: It contains a number of adjustments to a company’s balance of cash on hand that the company should reference to bring its records into alignment with those of the bank.Question: Give examples of various source documents which are used by an accountant to record a business transaction.Īnswer: Some of the source documents which help in the preparation of financial accounts, are as follows: It can also be in electronic form, such as an electronic record of the hours worked by an employee, as entered into a company’s timekeeping system. Many source documents are also stamped by personnel, to indicate an approval, or on which to write down the current date or the accounts to be used to record the transaction. A source document does not necessarily have to be a paper document. A Quantitative field (number of hours, the quantity of goods etc).A description of a business transaction. ![]() ![]() They usually contain the following information: This is where the role of source documents fall into place. Usually, auditors later review a company’s financial statements and need to verify that transactions have, in fact, occurred. Source documents are typically retained for use as a medium of evidence. Source documents in accounting terms are the physical basis or documents based on which business transactions are recorded.
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