Topic 3: Source Documents

 

 

What are Assets?

Assets are resources of value owned by the business.

 

What are Liabilities?

Liabilities are amounts owed by a business to external parties.

 

What is owner’s equity?

Owner’s equity is the owner’s interest or claim on the assets of the business. Owners’ Equity = Owners’ Capital at the Beginning + Additional Capital + Profits – Losses – Drawings

 

What are drawings?

Goods or other assets withdrawn from the business by owners for their personal use are called drawings. 

 

What is the accounting equation? What is the Balance Sheet Equation?

Assets = Liabilities + Owner’s Equity

 

What is an expanded accounting equation?

Assets = Liabilities + Capital + Revenue – Expenses – Drawings

Assets = Liabilities + Capital + Net Profit – Drawings

Assets = Liabilities + Capital – Net Loss – Drawings

 

What is revenue?

Revenue is the gross amount earned from the sale of goods or provision of services.

 

What is expense?

Expenses are the cost of assets consumed or services used up in the course of earning revenue.

 

What is a source document?

Source document is a written document that provides the details of a transaction and evidence that the transaction has taken place.

 

What are the features of a source document?

  1. Date when transaction took place

  2. Names and addresses of people /companies involved

  3. Nature of transaction

  4. Total amount of money involved

  5. Terms and conditions of transaction

  6. An authorised signature.

 

What is the importance of source documents?

  1. Required for audit purposes to check for fraud or corruption.

  2. Evidence or proof that a transaction has occurred

  3. They provide important information which are recorded into the books of prime entry.

 

What are the uses of source documents?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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