Source Documents:

Business uses some documents as evidence of the transactions. From these documents, all the
transactions are recorded in books of prime entry.

Name of Document Used for Who Issues or receives

Sales Invoice Credit Sales Issued by the supplier
Purchases Invoice Credit Purchases Received by the customer
Acknowledgement of cash received
Receipts Issued by the supplier
(Cash Purchases and Sales)
Request to accept the faulty goods
Debit Note Issued by the customer
(purchases or sales return)
Acknowledgement of sales or
Credit Note Issued by the supplier
purchases return
Issued by the customer /
Cheques Payment received through bank
payee
Attached with the cheque
Cheque Counterfoil Payment made through bank
book
Wages and salaries are paid to the
Pay-slip and Wage-sheet Made by the business.
employees
Summary of receipts and payments
Bank Statement Issued by the bank.
through bank
Issued by the supplier to
Summary of Account of the credit
Statement of Account demand the amount
customer.
receivable.

Books of Prime Entry:

The first books in which the transactions are recorded through source documents.

Transactions Books of Prime Entry Source Documents

Credit Sales Sales Day Book Sales Invoice
Credit Purchases Purchases Day Book Purchases Invoice
Sales Return (Return Inwards) Sales Return Day Book Credit Note
Purchase Return (Return Inwards) Purchase Return Day Book Credit Note
Cash Payments Cash Book Receipts
Cash Received Cash Book Receipts
Received cheques Cash Book Cheques
Payment by cheques Cash Book Cheque Counterfoil
Petty (Minor) Cash payments Petty Cash Book Vouchers
Correction of Errors General Journal -
Sale or Purchase of NCA on credit General Journal -
Drawings of goods by the owner General Journal -
Accounts:
All the similar transactions are classified and are known as accounts.

Types of Accounts Further Classified Categories

 All Trade Receivables
Personal Accounts
-  All Trade Payables
 All Income Statement
Accounts (Income and
Real Account
Expenses Accounts)
 All Temporary Accounts.
Impersonal Accounts
 All Statement of
Financial Position
Nominal Accounts
Accounts.
 All Permanent Accounts.

Ledgers:
All the similar transactions are classified into T-Accounts and are posted in ledger.

Accounts Ledger
Trade Receivables Accounts (Credit Customers’
Sales Ledger
Accounts)
Trade Payables Accounts (Credit Suppliers’
Purchases Ledger
Accounts)
All Other Accounts like Sales, Purchases, Assets,
Nominal Ledger
Drawings, Capital, Expenses and Revenues

Double Entry System:

According to this system, every transaction has two effects (Debit and Credit). Debit means left
hand side and credit means right hand side.

Classification Examples Debit Credit

Cash, bank, trade receivables, prepaid expenses,
Assets accrued income, premises, building, machines Increases Decreases
etc.
Liabilities Trade payables, bank overdraft, accrued
expenses, prepaid income. Decreases Increases
Capital Owner’s Investment Decreases Increases
Revenue Sales, rent receivables, commission receivables,
interest receivables, discount received, gain on Decreases Increases
disposal of NCA, reduce in PFDD
Expenses Rent Payables, Commission Payable, Salary,
wages, heat and light, loss on disposal, increase Increases Decreases
in PFDD etc.
Drawings Drawings of cash or goods for personal use Increases Decreases