2. Apply double entry concept

2. Apply Double Entry Concept

This element covers all the steps required to collect source information, record it in the books of original entry, post to ledger accounts using double-entry, prepare a trial balance, and use computerized systems.

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2.1 Accounting Source Documents Are Prepared

Source documents are the original written or electronic records that provide proof a transaction has occurred.
They are the starting point of the accounting process.

Examples of source documents:

• Invoices (sales or purchases)

• Receipts

• Debit notes

• Credit notes

• Delivery notes

• Purchase orders

• Cheque counterfoils

• Bank statements

• Cash register tapes

These documents are used to:

• Verify transactions

• Record accurate details (date, amount, parties involved)

• Support auditing and financial reporting

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2.2 Books of Original Entry Are Determined

Books of original entry are the first accounting books where transactions are recorded before posting to ledger accounts.

Types of books of original entry:

1. Sales Journal – for credit sales

2. Purchases Journal – for credit purchases

3. Sales Return Journal – for goods returned by customers

4. Purchases Return Journal – for goods returned to suppliers

5. Cash Book – for all cash and bank transactions

6. Petty Cash Book – for small daily payments

7. General Journal (Journal Proper) – for:

   • Opening entries

   • Closing entries

   • Correction of errors

   • Adjustments

   • Transfers

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2.3 Double Entry System Is Applied to Prepare Ledger Accounts

The double entry system states that every transaction has two equal and opposite effects:

• A Debit (Dr) entry

• A Credit (Cr) entry