Business Studies - Yr7

TERM: THIRD TERM
WEEK: FOUR
TOPIC: SOURCE DOCUMENTS
CONTENT:
1. Meaning of Source Documents
2. Uses of Source Documents
3. Contents/Types of Source Documents
4. Differences between Cash and Credit Transactions
SPECIFIC OBJECTIVES: By the end of the class, the learners are expected to:
i. explain the meaning of source documents;
ii. state the uses of source documents;
iii. explain the contents/types of source documents; and
iv. differentiate between cash and credit transactions.
MEANING OF SOURCE DOCUMENTS

In other to keep records of daily business transactions, documents are issued to show evidence of
such transactions. Those documents are called Source Documents.
Therefore, Source documents are the original records of cash and credit transactions from which
the accounting books are prepared. They are the documents from which information recorded in
the books of original entry is obtained by the bookkeeper.
Contents/Types of Source Documents

The types of source documents include the following:
Voucher
Purchase order
Invoice
Receipt for payment made
Cash registers tape
Credit note
Debit note
Cheque
Statement of account
1. Voucher: Any document which is used to support an entry in the book of account is called a
voucher. An invoice, for example is a voucher because it explains the nature of goods
bought or sold, the price and the terms of sales.
2. Purchase order: The purchase order is used mainly to show the quantity of goods needed
and description of items required. It is also used to make a purchase.
3. Invoice: An invoice is a source document usually prepared by the seller to the buyer when
goods are sold. The copy of an invoice with the seller is called the sales invoice, while the
copy with the buyer is called the purchases invoice.
4. Receipt: A receipt is a source document issued by the seller to acknowledge that payment
has been made by the buyer. It is an evidence of payment. A receipt relating to cash is called
cash receipt.
5. Cash registers tapes: This is a machine that gives the summary of transactions, and prints
out a slip. The slip acts as a receipt.
6. Credit note: This is a documents prepared by the seller to reduce the buyer’s indebtedness. It
is used in a situation where the customer has been erroneously overcharged.
7. Debit note: This is another source document prepared by the seller to increase the
indebtedness of the customer. It is used to correct and undercharge. It can also be called a
supplementary invoice.
8. Cheque: A cheque is a written order from a current account holder (drawer) to a bank
(drawee) to pay on demand a specified sum of money to the person named on it (payee).
Types of Cheque
Open cheque: This cheque can be paid over the counter of the bank. It is an uncrossed
cheque and cannot be paid into a current account.
Crossed cheque: It is a cheque in which two parallel lines are drawn across its face. It is
safer than an open cheque.
Dishonoured cheque: This is a cheque returned unpaid by the bank to the drawer, due to
insufficient funds, irregular signature, or discrepancy between amount written in words and
in figures. It can also be called stale or bounced cheque.
9. Statement of account: This is a source document prepared by the seller to the buyer at
regular intervals. It shows the summary of transactions between the buyer and the seller. It
gives the full details of the financial position of a business. It shows the debits and credits to
the account, and balance outstanding. It also shows the amount of purchases made and the
actual payment made.
DIFFERENCES BETWEEN CASH AND CREDIT TRANSACTIONS
Transactions are series of business activities that lead to the buying and selling of goods and
services. It includes:
1. Cash transactions: This is when money is immediately received or paid for transactions that
have taken place. Cash transactions are usually recorded in the book of account called
cashbook.
2. Credit transactions: This is when payment for goods and services is delayed until a later
date. Credit transactions recorded in the sales day book, purchases day book and general
journal.
STUDENT’S EVALUATION
1. What is a source documents;
2. Mention any five important source documents used in business;
3. Differentiate between a debit note and a credit note.
4. State the difference between cash and credit transactions
STUDENT’S ASSIGNMENT
Write the content of the following source documents:
Voucher
Purchase order
Invoice
Receipt for payment made
Cash registers tape
Credit note
Debit note
Cheque
Statement of account

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TERM: THIRD TERM

MEANING OF SOURCE DOCUMENTS

Contents/Types of Source Documents

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