Types of transactions:
- Cash transaction — cash is received or paid now, at the time of the transaction.
- Credit transaction — cash is received or paid at a later date.
7 source documents:
- Invoice — the seller issues this to inform the buyer of the amount owed for goods or services supplied on credit.
- Receipt — whoever receives the money issues this to acknowledge that a cash or cheque payment has been received.
- Credit note — the seller issues this to reduce the amount owed by a credit customer who returned goods or was overcharged.
- Debit note — the seller issues this to increase the amount owed by a credit customer who was undercharged.
- Payment voucher — the business issues this internally to authorise a cheque payment to a credit supplier.
- Remittance advice — the business sends this to inform the credit supplier which invoice the cheque payment is for.
- Bank statement — the bank issues this to record deposits and payments into and out of the business bank account, and it is used to identify bank charges, interest and dishonoured cheques.
Objectivity theory: All transactions must be supported by reliable and verifiable information, free from personal bias.
The accounting cycle (4 stages): Identify & record → Adjust → Report → Close.
Accounting information system (AIS): Source documents → Journals → Ledger → Trial balance → Statement of Financial Performance / Statement of Financial Position.