Business Documents (Copy)

2. Sources and Recording of Data

2.2 Business Documents

Purpose of Business Documents

• Business documents are essential written records used in buying and selling transactions.
• They provide evidence, authorisation, and details of financial dealings.
• Used as source documents to record transactions in books of original entry (journals).

Key Business Documents and Their Purpose

1. Invoice

• Issued by the seller to the buyer.
• Indicates goods sold on credit.
• Provides full details of the transaction:
  • Description of goods
  • Quantity
  • Unit price
  • Total value
  • Trade discounts
  • VAT (if applicable)
  • Due date for payment

Use:

• Source of entry in the Sales Journal (for the seller)
• Recorded in the Purchases Journal (for the buyer)

2. Debit Note

• Issued by the buyer to the seller.
• Sent when the buyer returns goods to the supplier or is overcharged.
• Requests a reduction in the amount payable.

Use:

• Source for updating Returns Outwards Journal
• The seller receives this and issues a credit note

3. Credit Note

• Issued by the seller to the buyer.
• Confirms a reduction in the amount owed by the buyer.
• Sent after goods are returned or errors in the invoice are corrected.

Use:

• Source for recording in the Returns Inwards Journal
• Reduces the balance in the customer’s account

4. Statement of Account

• Sent by the seller to the buyer at the end of a month or agreed period.
• Summarises:
  • Invoices issued
  • Payments received
  • Credit notes issued
  • Balance outstanding

Use:

• Helps buyers verify their records
• A reference before making a payment
• Used in the reconciliation of accounts

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course

5. Cheque

• A written order from the account holder instructing the bank to pay a specific amount to a person or business.
• Acts as a method of payment.

Key parts:

• Date
• Payee name
• Amount (in figures and words)
• Signature of drawer

Use:

• When a business makes or receives payment

6. Receipt

• Issued by the seller or service provider to acknowledge that payment has been received.

Includes:

• Date
• Amount
• Mode of payment
• Name of payer
• Purpose of payment

Use:

• Used as proof of payment
• Source for cash book entry

7. Cheque Counterfoil

• The stub of a cheque in the cheque book.
• Remains with the payer as proof that payment was made.
• Shows:
  • Cheque number
  • Date
  • Payee name
  • Amount

Use:

• Acts as a source document to record the transaction in the cash book (credit side)

8. Paying-In Slip

• A form filled out when depositing money into a bank account.
• Used when depositing:
  • Cash
  • Cheques

Includes:

• Date
• Amount
• Bank account number
• Name of depositor

Use:

• Source document to record cash received and bank deposit in the cash book

9. Bank Statement

• Issued periodically by the bank to account holders.
• Summarises all transactions in the bank account:
  • Deposits
  • Withdrawals
  • Charges
  • Interest earned
• Used for bank reconciliation

Use:

• Compare with the business’s cash book (bank column)
• Identify uncleared cheques, errors, omissions

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course

Completion of Pro-Forma Business Documents

Students must be able to complete sample (pro-forma) versions of business documents including:

Sample Pro-forma Invoice

Sample Pro-forma Credit Note

Sample Pro-forma Receipt

Received from: Mr. Ahmad
Amount: $500.00
Payment for: Office Furniture
Date: 5 June 2025
Received by: Bright Furniture Store

Sample Pro-forma Paying-In Slip

Depositor Name: Ali Enterprises
Account No: 123456789
Date: 7 August 2025
Cash: $300
Cheques: $700
Total: $1,000

Summary: Use of Documents in Recording

Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Accounting Full Scale Course