FABM1

LESSON 4.3: Source Documents in a Merchandising Business

Importance of Source Document Commonly Used Source Document in

a Merchandising Business
1. A source document,
commonly referred to as 1. Sales Invoice/Charge Invoice
business document, 2. Purchase Invoice
provides evidence that a 3. Sales Order
business transaction had 4. Purchase Order
occurred 5. Delivery Receipts
2. A source document is 6. Debit Memoranda
essential in the 7. Credit Memoranda
accounting process and is 8. Voucher
the basis of recording in 9. Official Receipts
the business’s books.
1.
3. It is used in tracking the
SALES /CHARGE INVOICE, PURCHASE
history of a business
INVOICE
accounting records so it
An invoice, also known as a bill, is
needs to be filed in a safe
issued by the seller to the buyer to
storage system where it
indicate that merchandise had been
can easily be retrieved
delivered and, therefore the buyer is
when the need for it
requested to pay the amount due.
arises.
This is the basis for recording sales
revenue in the SELLER’S books and
purchases in the BUYER’S books. A duplicate copy of the sales invoice is given to
the buyer and this is regarded by the buyer as a purchase invoice.
NOTE THAT THE SALES INVOICE AND PURCHASE INVOICE REFER TO THE SAME
DOCUMENT
Sales Invoice or Charge Invoice can be used interchangeably.
Typical Contents of an Invoice
1. Name and contact details of the seller
2. Tax details of the seller
3. The word “Invoice”
4. Invoice number
5. Name and contact details of the buyer
6. Date of the invoice
7. Credit terms

8. number of units delivered

9. the unit of measure for the goods
delivered
10. description of goods
11. unit selling price of the goods
12. total amount of the goods
Below is a sample invoice taken from Annex C of BIR Revenue Memorandum
Order No. 12-2013. The Bureau of Internal Revenue (BIR) is the tax collection
agency of the Philippines.

2. SALES / PURCHASE ORDER

The invoice should not be confused with sales/purchase orders and delivery
receipt. A sales order triggers the preparation of a sales invoice, while a purchase
order triggers the preparation of a sales order.
A sales order is prepared when the buyer informs the seller that he or she
wants to buy merchandise through a purchase order.
If the buyer does not prepare a purchase order, then the sales order simply
includes the following information on a piece of paper: (a) name and contact
details of the buyer; (b) description of goods; and (c) number of units ordered

3. DELIVERY RECEIPT
A delivery receipt is a document issued by the seller to confirm if
merchandise has been delivered to the billing address or the buyer’s place of
business. An authorized signature from the buyer’s end is a proof that
merchandise has been received in good condition by the buyer and that the
information on the document matches the merchandise received.
Because of the lack of information on total amount, the delivery receipt is
not used to record sales or purchases.

Typical Contents of a Delivery

Receipt
1. Name and contact details
of the seller
2. Tax details of the seller
3. The word “Delivery
Receipt”
4. The receipt number
5. The name and contact
details of the buyer
6. The date of the receipt
7. Credit terms
8. Number of units delivered
9. The unit of measure for
the goods delivered
10. Description of the goods
11. Authorized buyer
signature

Sample Delivery Receipt taken from Annex C of BIR Revenue Memorandum Order
No. 12-2013
4. DEBIT/CREDIT MEMORANDA
The debit memorandum and credit memorandum are documents issued
when there are returns and allowances. A debit memorandum or a debit note is
issued by the buyer to notify the supplier that there is a reduction in the
Accounts Payable maintained by the buyer, therefore, to tally, the supplier has to
also reduced the related Accounts Receivable.
While a credit memorandum or credit note has the same purpose as the debit
memorandum. The only difference is that a credit memorandum is issued by the
seller to notify the buyer that his/her account has been reduced and therefore
the related liability of the buyer is also reduced.

5. CASH/CHECK VOUCHER
A voucher, also known as payment voucher, is an internal document which
indicates authorization for payment. It is usually attached to the supporting
documents that require payment such as an invoice.
The issuance of voucher of vouchers reinforces the concept that before a
liability or expense is to be paid for, approval from appropriate officers is
necessary. This provides control over the business payments to its suppliers and
other parties.
A cash voucher is approval of payment in cash, while a check voucher is
approval of payment in the form of a check. This is the basis for recording cash
payments.

6. OFFICIAL RECEIPT
An official receipt is a document which acknowledges receipt of cash
or check. It is issued by the party who collects the payment.
It provides evidence that payment has been made and that the other
party has collected it. This is the basis for recording cash receipts.
With the use of computer-generated systems, a cash register tape
receipt can also serve as official receipt, as long as it provides complete
information as follows:

Typical Content of an Official

Receipt
1. Name and contact details
of the seller
2. Tax details of the seller
3. The word “Official Receipt”
4. The receipt number
5. The name and contact
details of the buyer
6. The date of the receipt
7. The amount in numbers
and words
8. The sales invoice number
or the reference number of
any other related
Sample Official Receipt for merchandising business provided for in Annex C of BIR
Revenue Memorandum Order No. 12-2013.