Source Documents, Books of Original Entry and Journals
Source Documents, Books of Original Entry and Journals
This domain tests whether you can trace a transaction from its source document into the correct book of original entry and then to the ledger. SPM questions often ask which document or journal is used for a credit sale, a return, or a cash payment.
Core rules
- Source documents provide evidence: sales invoice, purchase invoice, credit note, debit note, official receipt, cheque stub, bank statement, petty cash voucher.
- Books of original entry: sales journal for credit sales; purchases journal for credit purchases; sales returns journal; purchases returns journal; cash book for cash and bank; general journal for adjustments, opening entries and other non-regular transactions.
- A credit note issued by a seller reduces a receivable. A debit note issued by a buyer requests a reduction or records a return.
- Trade discount is deducted on the invoice and not recorded separately. Cash discount is recorded in the cash book or general journal.
Worked example
A business sells goods on credit for RM4,000. The sales invoice is entered in the sales journal as Dr Trade receivables RM4,000 and Cr Sales RM4,000. The customer later returns RM500 of goods; the seller issues a credit note, recorded in the sales returns journal as Dr Sales returns RM500 and Cr Trade receivables RM500. The sales journal total is posted periodically to the ledger, while individual customer accounts are posted from the journal.
Traps
- Confusing a credit note with a debit note.
- Recording a cash sale in the sales journal instead of the cash book.
- Entering trade discount as a ledger expense.
- Posting the journal total to an individual customer account instead of the control account.
Key points
- Source documents support journal entries
- Sales journal records credit sales only
- Credit note reduces receivable
- Trade discount is not a ledger item
- General journal handles non-regular entries