Double Entry Bookkeeping

Source Documents

Original evidence of business transactions

• Quotation: states a fixed price for specified goods or services before an order is accepted

• Purchase order: records goods or services the business wants to buy from a supplier

• Sales order: records an order received from a customer and helps track customer demand

• Goods despatched note (GDN): records goods sent to customers and supports delivery queries

• Goods received note (GRN): confirms goods received from a supplier and supports checking against orders and invoices

• Invoice: A document issued by a business to a customer for goods or services supplied on credit, showing the amount due for payment. When a business purchases goods or services on credit, it receives an invoice from the supplier showing the amount it owes.

• Remittance advice: shows which invoices and credit notes a payment relates to.

• Receipt: confirms that a payment has been received

• Debit note: asks a supplier to issue a credit note for returned goods or an overpayment

• Credit note:  reduces the amount owed where goods are returned or an overpayment has been made

Stages of Transaction

Documents carry different stages of a transaction

• Before Sale/Purchase: Quote, Purchase Order, Sales Order

• Goods Movement: Goods received notes, Goods despatched note

• Payment/Adjustment: Invoice, Credit Note, Debit Note, Receipt

Books of Prime Entry

Where transactions are first recorded

• Sales Day Book: Credit Sales

• Purchase Day Book: Credit Purchases

• Sales Return Day Book: Credit notes issued to customers

• Purchase Returns Day Book: Credit notes received from suppliers

• Cash Book: Cash and bank receipts/payments

• Petty Cash Book: Small Cash Payments

Day books are also called journals eg Sales Day Book = Sales Journal

Double Entry Bookkeeping

Transactions have two effects, Debit and Credit, these two are equal and opposite so that they will always balance each other

• Every debit entry has a corresponding credit entry

Accounting Quadrant

• Debit increases assets and expenses.

• Credit increases liabilities and income.