Accounting - Term 3 - Week 1

Imagine Thandi runs a busy spaza shop in Khayelitsha. Every day, she sells airtime, snacks, and cold drinks. When a customer pays R20 for bread, Thandi gives a till slip as proof of payment. This slip is a source document. It records what was sold, when, and for how much. Without it, Thandi can’t prove her sales or track her income. Source documents are the first step in the accounting process—they provide evidence for every transaction. Whether it’s a minibus taxi fare receipt or an EFT slip from a supplier in Durban, these documents help businesses stay organised and honest. The rule: every transaction must have a source document. This protects both the business and the customer, especially when disputes arise. Many learners think only big businesses use source documents, but even street vendors and informal traders rely on them to keep accurate records.

Sipho owns a small tuckshop in Soweto. When he buys stock from his supplier, he receives an invoice. When he pays by EFT, he gets a proof of payment slip. When customers buy sweets, he issues a cash register slip. Each of these is a different type of source document. Invoices show what was bought or sold on credit. Receipts and till slips prove cash payments. Cheque counterfoils (less common now) record cheque payments. EFT slips are digital proof of electronic payments. The key is to match the document to the transaction: credit sales need invoices, cash sales need receipts, and so on. Don’t confuse invoices (promise to pay) with receipts (proof of payment). This mistake often appears in exams—be precise about which document is used for which transaction.

Lerato, an aspiring entrepreneur in Polokwane, wants to keep her business records neat. She collects all her source documents—receipts, invoices, and EFT slips—and files them by date. At month-end, she uses these documents to record transactions in her journals. This is the start of the accounting cycle: source documents → journals → ledgers → financial statements. If Lerato loses a receipt, she can’t prove the transaction happened. This could cause problems during a SARS audit. Source documents are legal proof and must be kept for at least five years. They also help detect fraud and errors. Some learners think keeping documents is old-fashioned, but even digital businesses must keep electronic copies. The accounting cycle always begins with accurate source documents.

Step 1: Ahmed buys coffee beans from a supplier on credit. Reason: Credit purchases require an invoice as proof, because the payment will be made later and both parties need a record of what is owed. Step 2: The supplier gives Ahmed an invoice showing the amount owed, the date, and the items purchased. Step 3: Ahmed pays the supplier by EFT a week later. Reason: Payment by EFT produces an EFT slip as proof of payment, which serves as evidence that the debt has been settled. Step 4: Ahmed receives an EFT slip from his bank, which he files with the original invoice. Final Answer: The invoice records the purchase on credit; the EFT slip records the payment. Sanity check: Each transaction has a matching document—no gaps. If Ahmed only kept the invoice, he could not prove he paid. If he only kept the EFT slip, he could not prove what he bought.

Step 1: Sipho sells a cold drink for R12 cash to a customer. Reason: Cash sales need a receipt or till slip as proof, because the payment is immediate and the customer needs evidence of purchase. Step 2: He issues a till slip to the customer, which details the item, price, and date. Step 3: Later, Sipho sells chips to a local school on credit, meaning the school will pay later. Reason: Credit sales require an invoice, as it shows what is owed and acts as a request for payment. Step 4: He gives the school an invoice showing the amount owed, items sold, and payment terms. Final Answer: Cash sales = receipt/till slip; credit sales = invoice. Sanity check: Receipts show payment received, invoices show payment still owed. If Sipho gave a receipt for the credit sale, it would be incorrect and could cause confusion in his records.

Question: Lerato pays R150 cash for fuel for her minibus taxi in Mthatha. Which source document should she keep? Let’s think: She paid cash, so she needs proof of payment that shows the amount, date, and supplier. The correct document is a receipt from the petrol station, which she should file for her business records and for SARS. Modelled response: Receipt. Now you try: Lerato pays her mechanic by EFT for repairs. Which document does she keep? Answer: EFT slip. The EFT slip is the correct proof for electronic payments and should be kept with her business records.

Question: Thandi sells a Springboks jersey on credit to a local school. What source document does she issue? Let’s reason: Credit sales require an invoice, not a receipt, because the school will pay later. The invoice will show the amount owed and the payment terms. Modelled response: Invoice. Now you try: Thandi receives cash for a Banyana Banyana cap. Which document does she issue? Answer: Receipt or till slip. This is the correct document for a cash sale, and it provides immediate proof of payment to the customer.

1. List three types of source documents used in South African businesses, such as receipts, invoices, and EFT slips. 2. Name the document given for a cash sale and explain why it is important. 3. State how long businesses must keep source documents according to South African law and why this is necessary.

1. Match each transaction to its source document: (a) Credit purchase of stock, (b) Cash payment for rent, (c) EFT payment to supplier. 2. Explain why a receipt is not used for credit sales, using an example from a local business. 3. Identify the error: A learner files an invoice as proof of payment for a cash transaction. What should have been filed instead, and why?

1. Analyse why losing a source document can cause problems during a SARS audit, and give an example. 2. Classify these transactions by source document: (a) Cash sale, (b) Credit sale, (c) EFT payment, and explain your choices. 3. Justify the importance of keeping digital copies of source documents in modern businesses, especially when using online banking and e-commerce.

• Invoice
• Receipt
• EFT slip
• Credit note

Answer: Receipt

A receipt proves payment was made. Many confuse invoices with receipts, but invoices are for credit sales.

• To advertise products
• To provide proof of a transaction
• To calculate profit
• To pay employees

Answer: To provide proof of a transaction

Source documents are the first and most important evidence that a transaction took place. They are used to record information in the books of account and to prove to SARS or auditors that the business is honest and accurate. Choosing 'calculate profit' or 'advertise' is a common error, but those are not the main purposes.

• Invoice
• Receipt
• EFT slip
• Order form

Answer: EFT slip

An EFT slip is proof of electronic payment. Some think a receipt is always used, but EFTs have their own slip.

• Receipt
• Invoice
• Cheque
• Petty cash voucher

Answer: Invoice

Invoices are for credit sales; receipts are for cash sales. This is a common exam confusion.

• 1 year
• 3 years
• 5 years
• Indefinitely

Answer: 5 years

By law, documents must be kept for 5 years. Many think it’s shorter, but SARS requires five.

Answer: Receipt, till slip

Receipts and till slips both prove cash payments. Learners often forget till slips count, but both are accepted by auditors and are used daily in South African businesses. Remember, a receipt is usually handwritten or printed, while a till slip comes from a cash register.