SOURCE DOCUMENT AND JOURNALS: MEANING AND TYPES—BY INSTRUCTOR EUNICE OKOYE.
MEANING OF SOURCE DOCUMENT: A source document is a form in which transactions are firstly recorded before posted to their respective books. It include the following.
INVOICE: Invoice is a document given out by the seller to the buyer whenever the seller sells goods. It contains the name and address of the buyer and sellers, the date of sales, the quantity and the price of goods sold and a reference to the customers order number.
RECEIPT: This is a document issued to the buyer by the seller to indicate that some amount of money has been paid for buying a particular goods. It is a proof of payment.
CASH REGISTER: It contains the summary of each cash sales per day or for any specific period. Cash register machine can record the amount of sales, indicate the types of goods, produce a receipt for the customers, as well as the amount of the balance. It makes it easier for a book-keeper.
CREDIT NOTE: This is a source document issued by supplier/seller when a buyer returns goods to the seller. It is issued to correct the error of overcharged. Credit note is always printed in red.
DEBIT NOTE: It is a source document issued by the seller whenever the buyer has been undercharged.
VOUCHER: This is a source document used for obtaining authorization for a payment whether by cash or by cheque.
CHEQUE: This is a written order to a bank to pay a specific sum of money to a person whose name appear on it. It is usually issued by a debtor to the person he owes money.
MEANING OF JOURNAL: Journal is a book of original entry which contains the daily records of business transactions. Journal could be general or special.
GENERAL JOURNAL/JOURNAL PROPER: General Journal is issued to record all transaction [both sales and purchases] which do not pass through the book of original entry. E.g. Purchase and sales of capital equipment, correction of errors, Adjustment of account, opening and closing entries. It contains the date, the account to be credited, the account to be debited and the narrative of the events.
USES OF GENERAL JOURNAL: It can be used:
For opening and closing entries,
To correct errors,
To record purchases and sales of fixed asset and
To record transfer between accounts.
ADVANTAGES OF GENERAL JOURNAL:
It provides a convenient record of transaction in sequential order.
It reduces the risk of omission of transactions.
It provides the explanation of an entry.
SPECIAL JOURNALS: Special journal are:
PURCHASES JOURNAL/ PURCHASES DAY BOOK: It is used to record goods bought on credit [that is goods not yet paid for]. The addition of purchase journal is transfer to the debit side of the purchase account.
SALES JOURNAL/SALES DAY BOOK: This is the book used to record all goods sold on credit. The addition of the sales journal is transferred to the debit side of the sales account.
RETURN OUTWARD JOURNAL/RETURN OUTWARD DAY BLOOK: It is used to record all goods bought which are to be returned to the supplier as a result of defects. The seller will issue a credit note to the buyer. Return outward is also called purchases return and the addition of purchases return is transferred to the credit side of the return outward account.
SALES RETURN/RETURN INWARD JOURNAL: Return inward journal is used torecord all goods sold but are returned to the seller due to defects. Then, the seller will issue a credit note to the buyer.