Accounting - Term 1 - Week 4

Imagine Sipho running a spaza shop in Khayelitsha. Every time a customer buys bread or airtime, Sipho hands over a till slip. That slip is not just a piece of paper—it’s proof of the transaction. In accounting, these proofs are called source documents. They include receipts, invoices, bank deposit slips, and EFT confirmations. Each one captures the details: date, amount, parties involved, and what was bought or sold. Without these, Sipho can’t prove his sales or expenses. For the business, and for SARS (South African Revenue Service), these documents are vital. They form the first step in the accounting cycle, ensuring every rand is tracked. Many learners think only big businesses need these, but even a street vendor must keep records. Source documents protect against mistakes, fraud, and disputes. They are the backbone of honest business in South Africa.

Picture Lerato in Durban, selling Springbok jerseys before a big match. She gives a receipt for each sale. A receipt confirms cash received. When she buys stock from a supplier, she gets an invoice. An invoice is a request for payment, showing what was bought, the price, and payment terms. If she pays by EFT, she receives a proof of payment. Each document serves a unique purpose: receipts for cash in, invoices for credit purchases, cash slips for small cash sales, and deposit slips for money banked. A common misconception is that all documents are the same, but each one records a different stage in the transaction. For example, an invoice is not proof of payment—it’s just a request. Only a receipt or bank statement confirms money has moved. Knowing the difference is crucial for correct bookkeeping and for NSC exam marks.

Think of Ahmed in Polokwane, running a minibus taxi business. Every day, he collects cash fares and deposits the money at the bank. He keeps deposit slips as proof. These source documents are the starting point of the accounting cycle: first, the transaction happens; next, it’s recorded on a document; then, it’s entered into the accounting records (journals and ledgers). Without the right document, Ahmed can’t record the transaction correctly. This is where many learners go wrong—they skip the document step and jump straight to journals. In the NSC exam, you’ll lose marks if you can’t match the right document to the transaction. Always ask: what proof do I have for this transaction? That’s your source document. It’s the link between real-life events and the numbers in the books.

Step 1: Thandi sells a kota for R25 in Soweto and gives the customer a till slip. Identify the source document. Reason: The till slip is proof of a cash sale. Step 2: Record the transaction in the cash receipts journal (CRJ). Reason: Cash was received, so it belongs in the CRJ. Step 3: Attach the till slip to the CRJ entry for audit purposes. Reason: This proves the transaction happened. Final answer: The till slip is the source document, and the transaction is recorded in the CRJ. Sanity check: The document matches the transaction type (cash sale).

Step 1: Sipho buys cleaning supplies on credit from a supplier in Mthatha and receives an invoice for R400. Identify the source document. Reason: An invoice is issued for credit purchases. Step 2: Record the transaction in the purchases journal (PJ). Reason: Credit purchases are entered in the PJ, not the CRJ. Step 3: File the invoice for future reference and possible SARS audits. Reason: Proof of the transaction must be kept. Final answer: The invoice is the source document, and the transaction is recorded in the PJ. Sanity check: The document (invoice) matches the transaction (credit purchase).

Question: Lerato pays R1,000 by EFT to her supplier for new stock. What is the source document? Let’s think: She paid electronically, so she’ll get a proof of payment from her bank. Worked response: The source document is the EFT proof of payment, which she can print or save from her banking app. This proof shows the date, amount, and recipient, and is accepted by both the supplier and SARS as evidence of payment. Similar question: Sipho receives R500 cash from a customer and gives a receipt. What is the source document? Answer: The receipt, which serves as proof that cash was received and should be kept for records and possible audits.

Question: Ahmed deposits R2,000 collected from taxi fares into his business bank account. Which journal and document? Let’s think: He’s putting cash into the bank, so he’ll get a deposit slip from the bank teller or ATM. This slip includes the date, amount, and account details. The transaction is recorded in the cash receipts journal (CRJ) because money is coming into the business. Worked response: The deposit slip is the source document, and the transaction is recorded in the CRJ. This ensures that every rand collected is accounted for and can be traced if needed. Similar question: Thandi buys flour on credit and receives an invoice. Which journal? Answer: Purchases journal (PJ), because it is a credit transaction and the invoice is the proof.

1. List three common source documents used in South African businesses, such as receipts, invoices, and deposit slips. 2. Name the journal where a cash sale is recorded and explain why it is the correct journal for this type of transaction. 3. State what document you receive when you pay by EFT and describe what information it contains, such as date, amount, and recipient details.

1. Match each transaction to its source document: (a) Cash sale, (b) Credit purchase, (c) Bank deposit. For each, write the correct document and explain your choice. 2. Explain why it’s important to keep source documents, mentioning at least two reasons such as audit requirements and preventing fraud. 3. Identify the error: Recording a credit purchase in the cash receipts journal, and explain what should be done instead, including which journal is correct and why.

1. Analyse a scenario: Sipho buys goods on credit, pays later by EFT, and receives a receipt. Sequence the source documents and journals for each step, explaining your reasoning for each stage. 2. Justify why SARS requires businesses to keep source documents for five years, providing two detailed reasons related to tax and legal compliance. 3. Interpret a sample invoice and identify all key information needed for accounting records, such as date, amount, supplier, and items purchased, and explain why each is important.

• Invoice
• Receipt
• Bank statement
• Order form

Answer: Receipt

A receipt is proof that cash was received. An invoice requests payment, not proof of it. Many confuse these.

• Cash Receipts Journal
• Purchases Journal
• Cash Payments Journal
• Sales Journal

Answer: Purchases Journal

Credit purchases go in the Purchases Journal. This is because the Purchases Journal is specifically designed to record all credit purchases of stock or goods for resale. Cash journals are for cash transactions only, and using the wrong journal will lead to errors in the business’s records and lost marks in exams.

• Deposit slip
• Invoice
• Proof of payment
• Receipt

Answer: Proof of payment

Proof of payment confirms an EFT. A deposit slip is for cash deposits, not electronic transfers.

• To advertise products
• To prove a transaction occurred
• To calculate profit
• To pay salaries

Answer: To prove a transaction occurred

Source documents are evidence of transactions. They are not used for advertising or paying salaries.

• Invoices are proof that payment was made
• Invoices are requests for payment
• Invoices are only used for cash sales
• Invoices are not needed for accounting

Answer: Invoices are requests for payment

Invoices request payment for goods or services. They are not proof of payment, a common error.

Answer: To provide proof of transactions and to comply with SARS requirements.