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Move from lesson study to exam practice in Accounting.
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Imagine Sipho runs a spaza shop in Khayelitsha. Every time he buys stock or sells airtime, he gets or gives a slip, invoice, or receipt. These papers are called source documents. They are proof that a transaction happened. Without them, Sipho could forget what he paid, or a customer could claim they never bought anything. In big stores like Pick n Pay, every sale is recorded with a till slip. For Sipho, a handwritten receipt or a WhatsApp proof of payment can be just as important. The rule: every transaction must have a source document. This keeps records honest and helps when SARS or an auditor checks the books. Many learners think only big businesses need these documents, but even a street vendor needs them to track cash flow and avoid mistakes.
Thandi owns a hair salon in Durban. She uses different documents for different transactions. When she buys hair products from a supplier, she gets an invoice. When a client pays by EFT, she asks for a proof of payment. When she pays for electricity at the shop, she gets a cash slip. The main types of source documents are: cash slips (for cash payments), receipts (for cash received), invoices (for credit sales or purchases), credit notes (for returns), and EFT or bank deposit slips (for electronic payments). Each document has key information: date, amount, parties involved, and details of the goods or services. A common misconception is that a WhatsApp message or a verbal promise counts as a source document. Only written, dated, and detailed documents are valid for accounting.
Ahmed runs a small tuck shop in Polokwane. At the end of each day, he gathers all his slips and receipts. He records cash sales in the Cash Receipts Journal (CRJ), and cash payments in the Cash Payments Journal (CPJ). If he buys stock on credit, he uses the Purchases Journal (PJ). Each journal entry must match a source document. For example, a cash slip for R200 airtime sold goes into the CRJ. An invoice for R500 stock bought on credit goes into the PJ. The rule: never record a transaction without a source document. This prevents errors and fraud. Some learners mistakenly record the same transaction in both CRJ and CPJ—remember, money in (CRJ) and money out (CPJ) are separate.
Lerato works as a bookkeeper for a taxi association in Mthatha. One day, SARS asks for proof of all fuel expenses. Because Lerato kept every fuel slip, she can show exactly how much was spent and when. This is called an audit trail: a clear path from each transaction to its source document. If a document is missing, the expense might be disallowed, and the business could face penalties. Accurate source documentation builds trust with banks, investors, and government. It also helps owners spot theft or mistakes. Many learners think keeping every slip is a waste, but in reality, it protects the business and makes accounting easier.
Step 1: Sipho sells cold drinks for R150 cash at his tuck shop in Soweto. He gives the customer a till slip. Reason: Every cash sale must be supported by a source document. Step 2: He records the transaction in the Cash Receipts Journal (CRJ) under 'Sales'. Reason: Cash received from customers is entered in the CRJ. Step 3: He writes the date, amount (R150), and reference (till slip number) in the CRJ. Reason: Details must match the source document for accuracy. Final answer: The R150 cash sale is recorded in the CRJ with the till slip as proof. Sanity check: The amount on the slip matches the amount in the journal.
Step 1: Thandi buys hair dye on credit from a supplier in Durban for R400. She receives an invoice. Reason: Credit purchases are supported by invoices. Step 2: She records the transaction in the Purchases Journal (PJ). Reason: Purchases on credit go into the PJ, not the CPJ or CRJ. Step 3: She enters the date, supplier name, amount (R400), and invoice number. Reason: All details must match the invoice for a valid record. Final answer: The R400 credit purchase is recorded in the PJ with the invoice as the source document. Sanity check: The invoice total equals the journal entry.
Question: Ahmed pays R120 cash for bread stock at Boxer in Polokwane and receives a cash slip. How should he record this? Model thinking: Cash payments for stock are recorded in the CPJ. The cash slip is the source document. Worked response: Ahmed enters the date, amount (R120), and slip number in the CPJ under 'Trading Stock'. Similar question: Sipho pays R50 cash for airtime and gets a slip. Where and how should he record it? Answer: In the CPJ, under 'Trading Stock', with the slip as proof.
Question: Lerato receives a WhatsApp message from a supplier confirming a payment, but no official receipt. Is this a valid source document? Model thinking: Only written, dated, and detailed documents are valid. WhatsApp messages are not accepted for accounting. Worked response: Lerato should request an official receipt or bank proof. She cannot record the transaction without a valid source document. Similar question: Thandi gets a verbal promise of payment from a client. Can she record it? Answer: No, she needs a written, dated document.
1. List three types of source documents used in South African businesses, such as cash slips, invoices, and receipts. 2. Name two details every source document must have, for example, the date and the amount. 3. State which journal a cash sale is recorded in, and explain why it is important to use the correct journal for each transaction.
1. Ahmed receives R200 by EFT from a customer. Which source document should he use to record this, and in which journal should it be entered? 2. Thandi returns R100 of hair products to her supplier and gets a credit note. Where should she record this, and what information must be included? 3. Explain why a verbal agreement is not a valid source document, using an example from a real business situation.
1. Analyse the following: Sipho buys stock on credit for R500 and pays R200 cash for airtime. Identify the correct journals and source documents for each transaction, and explain your reasoning. 2. Justify why keeping all source documents is important for a business facing a SARS audit, including possible consequences of missing documents. 3. Record the following in the correct journals, stating the source document for each: (a) R300 cash sale (b) R150 credit purchase (c) R50 cash payment for taxi fare. Give a brief explanation for each entry.
Answer: Cash slip
A cash slip is proof of a cash payment. An invoice is for credit purchases, and a credit note is for returns.
Answer: CRJ
Cash sales are recorded in the Cash Receipts Journal (CRJ), not the CPJ (which is for payments).
Answer: WhatsApp message
A WhatsApp message is not a valid source document because it is not an official, written, and detailed record. It lacks the necessary information such as date, amount, and parties involved. In accounting, only formal documents like till slips, invoices, and receipts are accepted as proof of transactions. Many learners wrongly believe digital messages are enough, but they do not meet the legal or audit requirements.
Answer: PJ
Credit purchases are entered in the Purchases Journal (PJ), not in the cash journals. The PJ is specifically for purchases made on credit, which means payment will be made later. Recording it in the CRJ or CPJ would be incorrect because those are for cash transactions. Learners often confuse these journals, but remembering their purpose helps avoid errors.
Answer: Business logo
A business logo is not required for a source document to be valid. The essential details are the date, amount, and the parties involved in the transaction. While a logo may help identify the business, it is not a legal or accounting requirement. Learners sometimes focus on branding, but accuracy and completeness of transaction details are what matter.
Answer: To provide proof for audits and to prevent fraud or errors.
Source documents are needed for audits (like by SARS) and help catch mistakes or theft. Without them, a business cannot prove its transactions or defend itself if questioned by authorities or partners. This can lead to penalties or loss of trust.
Answer: It is not written, dated, or detailed, so it cannot be verified.
Verbal agreements lack the evidence needed for accounting and legal purposes. If there is a dispute or an audit, there is no way to prove what was agreed or when. This is why only written, signed, and dated documents are accepted in accounting.
Answer: Record in the CRJ using the EFT proof as the source document.
EFT receipts are proof of cash received and go into the CRJ. The Cash Receipts Journal is used for all money coming into the business, and the EFT receipt provides the necessary details such as date, amount, and payer. Without this document, the transaction should not be recorded.
Answer: Ask for a duplicate slip
He needs a valid source document. Recording without proof is risky and not allowed. If Ahmed asks for a duplicate slip, he ensures the transaction is properly documented and can be verified during an audit. Ignoring or estimating the transaction can lead to errors or accusations of fraud.
Answer: For SARS audits and legal requirements
SARS can audit up to five years back; legal compliance is essential. Keeping documents for this period protects the business from penalties and allows it to prove its transactions if questioned. Not keeping documents can result in fines or loss of business licenses.
Answer: Recorded in the wrong journal
Cash sales belong in the CRJ. Recording in the CPJ is a common error. The CPJ is only for cash payments, not receipts. This mistake can cause confusion and inaccurate financial statements, so learners must always check the journal's purpose.
Answer: Returns of goods
Credit notes are issued for goods returned, not for cash sales or payments. When a customer returns goods, the business provides a credit note as proof, which is then used to adjust the accounts. Learners often confuse credit notes with receipts, but their purpose is different.