4.1.1 ACCOUNTING CYCLE

Business Transactions

Financial events that change the assets, liabilities, and equity of a business entity.

What is the purpose of business documents in accounting?

They serve as the basis for recording business transactions.

What is a purchase requisition?

A document issued by the Sales Department to the Purchasing Department listing goods to be ordered.

What does a purchase order represent?

An order of goods from a buyer to a seller.

What information is contained in a receiving report?

The quantity and condition of goods received, as inspected by the Receiving Department.

What is a sales invoice?

A document issued by the seller to the buyer upon delivery of goods.

What does a purchase invoice indicate?

It details the delivery of goods from the seller to the buyer.

What is the purpose of a credit note?

To document the return of goods or provide allowances from seller to buyer.

How does a debit note function in business transactions?

It allows a buyer to document the return of goods or request for allowances.

What is a statement of account?

A reminder or request from the seller to the buyer to make a payment.

What does remittance advice inform?

That a payment has been made by the buyer to the seller.

What is a receipt in terms of business transactions?

A document acknowledging that the seller has received payment from the buyer.

What does a promissory note signify?

An agreement from a buyer to pay a seller at a later date.

What is a voucher used for?

To document payments made either by cash or cheque.

What distinguishes a petty cash voucher?

It is used for payments sourced from the petty cash fund.

What is the purpose of an inventory take sheet?

To record the inventory count, which is the basis for determining ending inventory.

What is a return in accounting?

The actual return of goods from the buyer to the seller.

What does an allowance indicate?

A mere request for a price reduction without the actual return of goods.

What are common reasons for returns and allowances?

Damaged goods, damage during delivery, or wrong specifications.

What is the first step in the accounting cycle?

Analyzing business transactions from source documents.