Cambridge IGCSE Accounting

ACCOUNTING NOTES
Chapters 6 – Business Documents

All accounting entries in a business are made using documents that are issued or
received by the business.
The main business documents that are used and followed are described below.
Invoice: an invoice is a document issued by the supplier of goods on credit showing
details, quantities and prices of goods supplied. This is issued from the supplier to
the purchaser.
Sometimes the supplier may provide the purchaser trade discount. This is shown as
a deduction on the invoice. Usually the rate of discount will increase according to
the quantity purchased, encouraging customers to buy in bulk.
The customer (purchaser) will use the original invoice to record the purchase of
goods on credit. The supplier keeps a copy of the invoice and uses it to record the
sales of goods on credit.

Debit Note: is a document issued by a purchaser of goods on credit to request a

reduction in the invoice received. A debit note is used to inform the supplier of any
shortages, overcharges and faults in the goods.
Debit notes are never entered in the accounting records. Neither the supplier nor
the customer will make any entries in their accounting records. A debit note is just
a request to the supplier to reduce the total of the original invoice or to send a
replacement of the goods.
If there is a price mentioned on the debit note then this is usually the price that the
purchaser paid after any trade discount.

Credit Note: is a document issued by a seller of goods on credit to notify of a

reduction in an invoice previously issued. When goods are returned, reported faulty,
or where there has been an overcharge on an invoice, the supplier will issue a credit
note.
To distinguish them from invoices, credit notes are sometimes printed in red.
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Cambridge IGCSE Accounting

The customer receives the original credit note and uses it to record the purchases
returns. The supplier keeps a copy of the credit note and uses it to record the sales
returns.

Statement of Account: is a document issued by the seller of goods on credit to

summarize the transactions for the month. At the end of each month, a supplier will
usually issue each customer with a statement of account. This is a summary of
transactions for the month.
A statement of account is never entered in the accounting records. Neither the
supplier not the customer makes any entries in their accounting records in respect
of a statement of account. This is just a reminder to the customer if the outstanding
amount. This can be checked against the customer’s own records.

Cheque: is a written order to a bank to pay a stated sum of money to the person or
business named on the order. Many accounts are paid by means of a cheque. A book
of preprinted cheques is issued by the bank, and the customer is only required to
complete the necessary details of date, amount and payee (the person or business to
whom the money is being paid).
The supplier receives the cheque. A paying-slip is completed when the cheque is paid
into the bank. The counterfoil of this paying-slip is used to make the entry in the cash
book to show the money paid into the bank and to make note of the discount in the
discount allowed column.
The customer keeps the cheque counterfoil and uses it to make the entry in the cash
book to show the money paid out of the bank and to make a note of the discount in
the discount received column.

Receipt: is a written acknowledgement of money received and acts as a proof of

payment.
Since a cheque passes through the banking system it can act as a receipt, so many
businesses do not issue receipts if account have been paid by cheque.
Where goods are sold for cash, the customer is usually provided with a receipt.

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