Accounting - Term 3 - Week 10

Imagine Thandi runs a spaza shop in Khayelitsha. Every time she sells a loaf of bread or buys airtime, she gets a slip or gives a receipt. These slips are called source documents. They are the first proof that a transaction happened. Without them, Thandi wouldn’t know how much she earned or spent. For example, when she buys cooldrinks from a wholesaler, she receives an invoice. When a customer pays her cash, she issues a cash slip. These documents are the backbone of her accounting records. The rule: every transaction must be supported by a source document. A common misconception is that only big businesses need to keep receipts. In reality, even small businesses and side hustles must keep source documents for tax and record-keeping. SARS (South African Revenue Service) can ask for these at any time. So, whether you’re in Polokwane or Durban, source documents keep your business honest and legal.

Sipho owns a minibus taxi business in Soweto. When he fills up with petrol, he gets a till slip. When he repairs his taxi, the mechanic gives him a tax invoice. If a customer pays him for a monthly taxi card, he issues a receipt. Each document matches a specific transaction: cash slips for cash sales, invoices for credit purchases, receipts for payments received, and bank deposit slips for money put into the bank. For example, a bank statement from FNB shows all money in and out of Sipho’s business account. The rule: always match the correct source document to the transaction. Don’t confuse a cash slip (proof of payment) with an invoice (request for payment). Many learners mix these up in exams, losing marks. Remember: invoices are for credit, cash slips and receipts are for cash.

Lerato runs a small printing business in Mthatha. She buys paper on credit from a supplier and receives an invoice. Later, she pays the supplier and gets a receipt. First, she records the invoice in her purchases journal, showing she owes money. When she pays, she records the payment in the cash payments journal. The accounting cycle starts with the source document, then moves to the journal, then to the ledger, and finally to the financial statements. If you skip a document or record it in the wrong journal, your books won’t balance. The rule: always start with the source document and follow the cycle step by step. Many learners try to record transactions from memory, but this leads to errors. Always use the document as your starting point.

Step 1: Thandi sells cold drinks for R200 cash and issues a cash slip to the customer. This is a typical transaction in her spaza shop. Step 2: Identify the source document – it’s a cash slip, which means it’s a cash transaction, not credit. Step 3: Record the transaction in the cash receipts journal (CRJ) because money is received by the business. Step 4: Write the details: Date of transaction, Details (Cold drinks), Source document number (from the slip), and Amount (R200). Step 5: Double-check that the cash slip matches the amount received and that the entry is in the correct journal. Final answer: The R200 cash sale is recorded in the CRJ with the cash slip as proof. Sanity check: The business’s cash increases, matching the cash slip and the journal entry.

Step 1: Sipho buys tyres on credit for R1,500 from Ahmed’s Tyres and receives an invoice. This is a common expense for his minibus taxi business. Step 2: Identify the source document – it’s an invoice, which means it’s a credit purchase, not cash. Step 3: Record the transaction in the purchases journal (PJ) because goods are bought on credit and payment will be made later. Step 4: Write the details: Date of purchase, Details (Tyres), Source document number (from the invoice), and Amount (R1,500). Step 5: Confirm that the invoice is for credit and not a cash slip, to avoid recording in the wrong journal. Final answer: The R1,500 credit purchase is recorded in the PJ with the invoice as proof. Sanity check: The business’s liabilities increase, matching the invoice and the journal entry.

Question: Lerato pays R300 cash for printer ink and receives a till slip. Let’s think: What is the source document? A till slip, so it’s a cash payment. Which journal? Cash payments journal (CPJ). Record: Date, Details (Printer ink), Source document number, Amount (R300). Model answer: The R300 cash payment is recorded in the CPJ with the till slip as proof. Now you try: Ahmed pays R250 cash for stationery and receives a till slip. Which journal? What details? (Answer: CPJ, Date, Stationery, Till slip number, R250)

Question: Sipho deposits R2,000 from taxi fares into his FNB business account and receives a bank deposit slip. What is the source document? A bank deposit slip, so it’s a cash receipt. Which journal? Cash receipts journal (CRJ). Record: Date, Details (Taxi fares), Source document number, Amount (R2,000). Model answer: The R2,000 deposit is recorded in the CRJ with the bank deposit slip as proof. Now you try: Thandi deposits R1,500 from sales into her bank account. Which journal? What details? (Answer: CRJ, Date, Sales, Bank deposit slip, R1,500)

1. List three types of source documents used in South African businesses, such as cash slips, invoices, and receipts. 2. Match each document: invoice, cash slip, receipt – to its correct transaction type (credit purchase, cash sale, cash received). 3. State why it is important to keep source documents, considering both legal and business reasons.

1. Identify the correct journal for each: a) Thandi buys bread on credit (Purchases Journal), b) Sipho pays cash for fuel (Cash Payments Journal), c) Lerato receives cash for printing (Cash Receipts Journal). 2. Explain what could go wrong if a business loses its source documents, such as errors in records or problems with SARS. 3. Record the following: Ahmed receives R400 cash for airtime sales and issues a cash slip. Which journal and details are needed?

1. Analyse this scenario: Sipho receives an invoice for R2,000 tyres but pays only R1,000 now and the rest later. How should this be recorded in the journals? 2. Justify why SARS requires businesses to keep source documents for at least five years, using examples. 3. Solve: Lerato deposits R3,000 from cash sales and receives a bank deposit slip. Record the transaction in the correct journal and explain your reasoning for your choice.

• Invoice
• Cash slip
• Order form
• Statement

Answer: Cash slip

A cash slip is proof of a cash sale. Many confuse it with an invoice, but invoices are for credit sales.

• To decorate the shop
• To prove a transaction occurred
• To advertise products
• To pay staff salaries

Answer: To prove a transaction occurred

Source documents are evidence of transactions and are essential for accurate record-keeping. Without them, there is no proof that a transaction actually took place, which can lead to disputes, errors, or problems with audits. Learners sometimes think documents are just for admin, but they are the foundation of accounting.

• Cash receipts journal
• Purchases journal
• Cash payments journal
• Sales journal

Answer: Cash payments journal

Cash payments journal records all cash outflows. Many mix this up with the receipts journal.

• Cash slip
• Invoice
• Receipt
• Bank statement

Answer: Invoice

An invoice is for credit purchases and shows the amount owed. A cash slip is only for cash purchases. Learners often mix these up, but invoices are always linked to credit transactions and are needed for accurate records and later payment.

• Bank deposit slip
• Invoice
• Order form
• Receipt

Answer: Bank deposit slip

A bank deposit slip is proof of a deposit. Receipts are for payments received, not deposits.