Accounting - Term 4 - Week 1

Imagine Thandi runs a spaza shop in Khayelitsha. Every time she buys stock from a wholesaler, she gets a cash slip or invoice. These pieces of paper are not just for her records—they are proof that a transaction happened. In accounting, we call these source documents. They are the starting point for all entries in the books. Without them, it’s impossible to track money in and out, or to prove what happened if SARS audits her. For example, a cash register slip shows she paid R500 for cold drinks. This slip is the evidence she needs to record the purchase in her books. The rule: every transaction must have a source document. Many learners think you can record a transaction based on memory or a WhatsApp message, but only official documents count. This is crucial for accuracy and for passing your matric exams.

Sipho works at a car wash in Polokwane. When a customer pays cash, he gives them a receipt. If they pay by EFT, he prints the proof of payment. Common source documents include cash slips, receipts, invoices, credit notes, debit notes, and EFT confirmations. Each has a specific use: a cash slip proves cash was received; an invoice requests payment; a credit note corrects an overcharge. For example, if a customer returns a faulty tyre, Sipho issues a credit note. In South African businesses, you’ll also see handwritten receipts, especially in informal sectors. Don’t confuse an invoice (which asks for payment) with a receipt (which proves payment was made). Many learners mix these up, so always check the document’s heading and details.

Lerato helps her uncle in a Durban tuck shop. She collects all the cash slips and invoices at the end of the day. To record these, she first checks the date, amount, and details on each document. She then enters the information into the correct journal—cash receipts journal (CRJ) for money received, cash payments journal (CPJ) for money paid out. For example, a cash slip showing R200 received for airtime sales goes into the CRJ. A payment to the electricity supplier, shown on an EFT proof, goes into the CPJ. The key is to match each transaction to the right journal using the source document as evidence. A common mistake is to record the same transaction twice if it appears on both a slip and a bank statement—only the original source document should be used for first entry.

During the NSC exams, markers want to see that you can read and interpret source documents correctly. For example, if Ahmed in Mthatha receives an invoice dated 31 October but only pays on 2 November, the payment is recorded when cash actually leaves the business, not when the invoice is received. Examiners often set questions where dates or amounts are tricky—always check the document carefully. Another error is misreading handwritten receipts or missing key details like VAT. If you’re unsure, look for the business name, date, and total amount. Practicing with real South African documents, like those from minibus taxi associations or local supermarkets, will help you spot these details quickly in exams.

Step 1: Thandi sells cold drinks for R150 cash and gives the customer a cash slip. The slip shows the date, amount, and item. Step 2: She checks the cash slip for accuracy—date matches today, amount is correct, and her business name is on it. Step 3: She enters the transaction in the cash receipts journal (CRJ) under 'Sales' because money was received. Step 4: She files the cash slip as proof. Step 5: She checks that the cash in the till matches her CRJ entry to avoid mistakes. Final answer: The R150 sale is recorded in the CRJ with the cash slip as evidence. Sanity check: The cash in the till should match the CRJ entry. If it doesn’t, she must investigate immediately.

Step 1: Sipho pays R400 to a supplier via EFT and receives an electronic proof of payment. Step 2: He checks the proof for the supplier’s name, date, and correct amount. Step 3: He enters the transaction in the cash payments journal (CPJ) under 'Trading stock' because this is a business expense. Step 4: He saves the EFT proof for records. Step 5: He compares the EFT proof with the bank statement at month-end to confirm the payment went through. Final answer: The R400 payment is recorded in the CPJ with the EFT proof as the source document. Sanity check: The bank statement should show the same payment, confirming accuracy.

Question: Lerato buys airtime for the tuck shop using cash and receives a handwritten receipt. Which journal will she use? Let’s think: She paid cash, so it’s an expense. The handwritten receipt is proof. Worked response: She records the transaction in the cash payments journal (CPJ) using the receipt as the source document. This ensures her records are accurate and can be checked later. Now you try: Sipho receives R250 cash for car wash services and gives a cash slip. Which journal should he use? Answer: Cash receipts journal (CRJ), because he received cash and the cash slip is his proof.

Question: Ahmed receives an invoice for cleaning supplies but hasn’t paid yet. Should he record the payment now? Let’s reason: An invoice requests payment, but no cash has left the business yet. Worked response: He waits until he pays, then records it in the CPJ using the proof of payment as the source document. This avoids recording the same transaction twice or too early. Now you try: Thandi gets a receipt after paying for bread stock. Should she record the payment? Answer: Yes, she records it in the CPJ, because the receipt is proof that the payment was made.

1. List three common source documents used in South African businesses, such as cash slips, receipts, and invoices. 2. State which journal you would use for a cash sale and explain why. 3. Name one detail that must appear on a valid source document and explain its importance for record-keeping.

1. Given a scenario where Sipho pays for cleaning materials by EFT, identify the source document and journal, and explain your reasoning. 2. Explain why a WhatsApp message is not a valid source document, using two supporting points. 3. Distinguish between a credit note and a receipt by giving an example of when each would be used in a business.

1. Analyse a sample invoice and identify three errors that could cause problems in an audit, such as missing dates or incorrect amounts. 2. Solve: Lerato receives R500 cash for airtime sales and issues a cash slip. Record the transaction in the correct journal with all necessary details, including date and reference. 3. Justify why keeping original source documents is essential for passing a SARS audit, giving at least two reasons.

• Invoice
• Receipt
• Credit note
• Order form

Answer: Receipt

A receipt is proof of payment. An invoice requests payment, and a credit note corrects errors. Many confuse invoices with receipts.

• CPJ
• CRJ
• General Journal
• Petty Cash Journal

Answer: CRJ

Cash received is entered in the cash receipts journal (CRJ). CPJ is for payments, not receipts.

• Date
• Amount
• Business name
• Customer’s ID number

Answer: Customer’s ID number

The customer’s ID number is not required on a source document for accounting purposes. The date, amount, and business name are necessary to prove when, how much, and by whom the transaction was made. Many learners think extra details like ID numbers are needed, but they are not required for validity.

• Goods are sold
• Goods are returned
• Payment is received
• An order is placed

Answer: Goods are returned

Credit notes correct overcharges or returns. Many think it’s for sales, but it’s for returns.

• They prove payment was made
• They request payment
• They are only used for cash sales
• They replace receipts

Answer: They request payment

Invoices request payment. They do not prove payment and are not only for cash sales.

Answer: They provide proof of transactions and are required for audits by SARS.

Source documents are important because they serve as legal proof that a transaction took place, and they are needed for tax and audit purposes. Without them, a business cannot defend itself during an audit or prove its income and expenses to SARS, which could lead to penalties or fines.