Business Documents (Copy)
Cheat Sheet: 2.2 Business Documents
O Level and IGCSE Accounting Quick Revision
Purpose of Business Documents
- Business documents are written evidence of transactions between buyers and sellers.
- They are used to record, verify, and track financial activity and are sources for bookkeeping entries.
Common Business Documents – Meaning and Use
| Document | Purpose |
|---|---|
| Invoice | Issued by seller to buyer to demand payment for goods/services sold on credit. |
| Debit Note | Sent by buyer to seller to request a reduction in amount due (e.g. damaged goods). |
| Credit Note | Issued by seller to buyer to confirm a reduction in the invoice total. |
| Statement of Account | Summary of transactions between a seller and buyer, showing the total balance due. |
| Cheque | A written instruction by the account holder to the bank to pay a stated amount. |
| Receipt | Acknowledges that payment has been received. |
Pro-Forma Documents (Blank Formats)
| Document | Key Sections |
|---|---|
| Invoice | Seller & Buyer name, Date, Description of goods, Unit price, Quantity, Total, Terms |
| Debit Note | Buyer to Seller: Original Invoice No., Reason for debit, New adjusted amount |
| Credit Note | Seller to Buyer: Reference to original invoice, Reason, Amount reduced |
| Statement of Account | Opening balance, all invoices/credits/debits, payments received, closing balance |
| Cheque | Payer’s name, Payee’s name, Amount (in figures and words), Date, Signature |
| Receipt | Received from (payer), Date, Amount, For what purpose, Signature |
Examples of Each Document
Invoice Example
| Item | Quantity | Unit Price | Total |
|---|---|---|---|
| Pens | 10 | $2 | $20 |
| Notebooks | 5 | $4 | $20 |
| Total | $40 |
Credit Note Example
(issued for return of 2 damaged pens)
| Item | Quantity | Unit Price | Total |
|---|---|---|---|
| Pens (returned) | 2 | $2 | $4 |
| Total Credit | $4 |
Statement of Account Example
| Date | Details | Debit ($) | Credit ($) | Balance ($) |
|---|---|---|---|---|
| 1 Jan | Opening Balance | 150.00 | ||
| 3 Jan | Invoice #101 | 100.00 | 250.00 | |
| 10 Jan | Payment Received | 150.00 | 100.00 |
Source Documents for Bookkeeping Entries
| Source Document | Book of Prime Entry Used |
|---|---|
| Invoice | Sales Journal / Purchases Journal |
| Credit Note | Sales Returns / Purchases Returns Journal |
| Cheque Counterfoil | Cash Book |
| Paying-in Slip | Cash Book |
| Receipt | Cash Book |
| Bank Statement | Cash Book + Bank Reconciliation |
Key Points for Exam
- Invoice initiates the recording of credit sales/purchases.
- Debit Note starts a process of claiming return/reduction.
- Credit Note is a seller’s way of acknowledging a return/reduction.
- Statement of account is a summary document to check payments.
- Receipts and cheques are vital for cash and bank entries.
- All these documents are primary evidence for accurate bookkeeping.