Accounting - Term 3 - Week 4

Imagine Thandi runs a busy spaza shop in Soweto. Every day, she sells airtime, snacks, and cooldrinks, and receives cash, EFTs, and sometimes even SnapScan payments. Each transaction leaves a paper trail: a till slip, a supplier invoice, or a bank deposit slip. These are called source documents. They are proof that a transaction happened. For example, when Thandi buys stock from her supplier in Polokwane, she gets an invoice. When a customer pays cash, she gives them a receipt. Without these, her records would be guesswork. The rule: every transaction must have a source document. This keeps her business honest, helps her prepare for SARS audits, and prevents theft or mistakes. Many learners think only big businesses need these documents, but even a small tuck shop must keep them to track money in and out.

Picture Sipho, who runs a minibus taxi in Durban. He collects cash fares, pays for petrol, and sometimes receives payments via EFT. The main source documents he uses are: cash register slips (for sales), duplicate receipts (for cash received), bank deposit slips (when banking cash), EFT proofs (for electronic payments), and supplier invoices (for goods bought on credit). Each document has a unique purpose. For example, a cash register slip proves a sale happened, while a supplier invoice proves Sipho owes money for fuel. The key is matching the document to the transaction. A common misconception is that all cash received goes into the Cash Receipts Journal (CRJ), but only amounts with a valid source document should be recorded. If Sipho loses a petrol slip, he cannot record the expense properly.

Lerato, who manages a small salon in Khayelitsha, collects all her source documents at the end of each day. She sorts them: cash receipts go into the CRJ, cash payments into the Cash Payments Journal (CPJ), and credit purchases into the Purchases Journal (PJ). For example, if she receives R200 for a haircut and issues a receipt, she records it in the CRJ. If she pays R100 cash for hair products and gets a till slip, she records it in the CPJ. The process: 1) Identify the document, 2) Check the transaction type, 3) Record in the correct journal. Many learners mix up journals, especially with EFTs. Remember: if money comes in, it’s CRJ; if money goes out, it’s CPJ. EFTs are treated like cash for journal purposes.

Ahmed runs a corner café in Polokwane. One day, he finds a cash receipt for R500, but he accidentally records it in the CPJ instead of the CRJ. This mistake will make his cash balance look lower than it is. To fix it, Ahmed must reverse the incorrect entry and record it correctly in the CRJ. Another error: recording a transaction without a source document. If Ahmed buys cooldrinks from a supplier but loses the invoice, he cannot record the purchase until he gets a duplicate. Always check: does every entry have a matching document? If not, don’t record it. This protects the business and keeps the books accurate, especially important when SARS or a bank asks for proof.

Step 1: Thandi sells snacks for R150 cash and issues a receipt (Receipt 021). Reason: The receipt is the source document for the cash received. Step 2: Identify the correct journal. Reason: Cash received goes into the Cash Receipts Journal (CRJ). Step 3: Record the entry: Date: 3 August; Details: Snacks; Receipt No.: 021; Amount: R150. Reason: All details must match the source document. Step 4: Check that the cash was actually received and the receipt is present. Reason: Prevents errors or fraud. Final answer: The R150 cash sale is correctly recorded in the CRJ with all details matching the receipt. Sanity check: The CRJ total should increase by R150.

Step 1: Sipho buys tyres on credit from TyreWorld for R2 000. He receives Invoice 104. Reason: The invoice is proof of a credit transaction. Step 2: Identify the correct journal. Reason: Credit purchases of stock go into the Purchases Journal (PJ). Step 3: Record the entry: Date: 7 August; Supplier: TyreWorld; Invoice No.: 104; Amount: R2 000. Reason: Ensures accuracy and traceability. Step 4: Double-check that no cash was paid. Reason: Only credit purchases go in the PJ. Final answer: The R2 000 credit purchase is correctly recorded in the PJ. Sanity check: The supplier’s account should now show R2 000 owed.

Question: Lerato pays R500 via EFT for shampoo stock and receives an EFT proof. Where and how should she record this? Model thinking: EFT is treated like cash leaving the business. The proof is the source document. Worked response: Record in the CPJ. Date: 10 August; Details: Shampoo stock; Document: EFT proof; Amount: R500. The reason is that EFTs are immediate and reduce the business’s cash, just like handing over physical notes. Always check that the EFT proof matches the payment. Similar question: Ahmed pays R300 via EFT for electricity. Where and how should he record it? Answer: In the CPJ, with the EFT proof as the source document. He must also ensure the payment appears on the bank statement to confirm it was processed.

Question: Sipho receives R250 cash for a taxi fare but forgets to issue a receipt. Can he record this in the CRJ? Model thinking: Every entry must have a source document. No receipt means no proof, and this could cause problems if SARS audits the business. Worked response: He cannot record it until a receipt is issued. He should immediately write out a receipt to create the necessary proof. Similar question: Thandi receives R100 for airtime but loses the receipt. Can she record it? Answer: No, she must issue or find the receipt first, otherwise the transaction should not be entered in the CRJ. This prevents mistakes and fraud.

1. List three types of source documents you might find in a Durban minibus taxi business, such as receipts, cash register slips, and EFT proofs. 2. State which journal a cash sale goes into and explain why. 3. Name the source document for a credit purchase and describe its purpose in recording.

1. Record a R400 cash payment for cleaning supplies with a till slip in the correct journal, showing all details. 2. A supplier invoice for R1 500 is received for goods bought on credit. Show the full journal entry and explain your reasoning. 3. Explain why an EFT proof is treated like a cash document in accounting, using a real-life example from a South African business.

1. Ahmed receives R700 cash but accidentally records it in the CPJ. Identify and correct the error, showing both entries. 2. Thandi loses a supplier invoice for R2 000. What should she do before recording the purchase? Explain your answer. 3. Compare the treatment of cash and credit transactions in journals using examples from local businesses, and discuss why accuracy is important for audits.

• Invoice
• Receipt
• Bank statement
• Order form

Answer: Receipt

A receipt is proof of cash received. An invoice is for credit sales, not cash. Many confuse the two.

• CRJ
• CPJ
• Purchases Journal
• Sales Journal

Answer: CPJ

Cash payments go in the Cash Payments Journal (CPJ). A common error is to use the CRJ for all cash.

• Receipt
• Invoice
• Bank deposit slip
• Cheque

Answer: Invoice

An invoice is proof of a credit purchase. Receipts are for cash received, not credit.

• CPJ
• CRJ
• Purchases Journal
• General Journal

Answer: CRJ

EFTs received are treated like cash received and go in the CRJ. Many think EFTs are separate.

• To make the journals look neat
• To provide proof and prevent fraud
• Because the teacher says so
• To increase profits

Answer: To provide proof and prevent fraud

Source documents are legal proof that a transaction really happened. Without them, anyone could make up or hide transactions, which could lead to fraud or mistakes. This is why auditors and SARS always check for matching documents.

Answer: Receipt, cash register slip

Both a receipt and a cash register slip are accepted as proof of cash received. These documents show the amount, date, and details of the transaction, which is why they are required in accounting. Bank deposit slips can also be used if cash is deposited.