Key Concepts
Each transaction is supported by a source document that triggers the recording. The table below connects each transaction type to the document that records it and the accounting elements affected.
| Transaction | Source Document | Element(s) Affected |
|---|---|---|
| Credit sale | Invoice | Assets (+Trade receivables, −Inventory); Equity (+Sales revenue, −Cost of sales) |
| Cash sale | Receipt | Assets (+Cash in hand, −Inventory); Equity (+Sales revenue, −Cost of sales) |
| Credit purchase | Invoice | Assets (+Inventory); Liabilities (+Trade payables) |
| Customer returned goods | Credit note | Assets (−Trade receivables, +Inventory); Equity (−Sales returns, +Cost of sales reversal) |
| Business undercharged customer | Debit note | Assets (+Trade receivables); Equity (+Sales revenue) |
| Paid credit supplier by cheque | Payment voucher | Assets (−Cash at bank); Liabilities (−Trade payables) |
How to Remember
Match the document to the trigger:
- Invoice → credit sale / credit purchase (an amount owed is created)
- Receipt → cash received
- Payment voucher → cash or cheque paid out
- Credit note → customer owes less (goods returned / overcharge corrected)
- Debit note → customer owes more (undercharge corrected)
Credit note = customer's account Credited (owes less); Debit note = Debited (owes more).
Check Your Understanding
A business makes a cash sale. Which source document is issued, and which accounting elements are affected?
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Receipt. Assets increase (Cash in hand +, Inventory −); equity increases (Sales revenue +, Cost of sales −).
True or false: When a customer returns goods, the seller's Trade receivables increase.
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False. Trade receivables decrease (the customer owes less). The credit note reduces the amount owed.
A business paid a credit supplier by cheque. Which two elements are affected, and do they increase or decrease?
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Assets decrease (Cash at bank −); liabilities decrease (Trade payables −).