Business Transactions are recorded in the books of accounts on the basis of an evidence such as bills of purchases, invoices for sales, debit and credit notes, etc. These evidences being the basis of recording entry, are known as Source Documents.
Rules of debit and credit are applied to each transaction and a voucher is prepared before recording in the books of original entry, i.e., Journal and special purpose books in a chronological order. The entries recorded in these books of accounts are transferred to the specific Ledger accounts.
In this Chapter, we shall discuss Source Documents and the preparation of a Voucher.
4.01 Source Documents 4.02 Meaning of a Voucher 4.03 Types of Vouchers 4.04 Preparation of a Voucher
Illustration 1 During the financial year 2009 – 10, Ashok had cash sales of Rs.3,90,000and credit sales of Rs.1,60,000. His expenses for the year were Rs.2,70,000 out of which Rs.80,000 are yet to be paid. Find out Ashok’s income for 2009 – 10 under both the bases of Accounting.
(i) When Cash Basis of Accounting is followed:
Solution:
Rs.
Revenues (inflows of cash, i.e., cash sales)
3,90,000
Less: Expenses (outflow of cash) (Rs.2,70,000 – Rs.80,000)
1,90,000
Net Income
2,00,000
Credit sales and outstanding expenses will not be considered under Cash Basis of Accounting.
(ii) When Accrual Basis of Accounting is followed:
Solution:
Rs.
Total Sales = Cash Sales (Rs.3,90,000) + Credit Sales (Rs.1,60,000)
=
5,50,000
Less: Total Expenses for the Year
2,70,000
Net Income
2,80,000
Note: Rs.80,000 on account of expenses still to be paid relate to this year and hence are to be charged to the revenue of this year. Similarly, credit sales of Rs.1,60,000 is taken in the year in which sales transaction is done.
Introductions to Accounting
Illustration 2 Mr. Ashok supplies you the following information about his income and expenses for the financial year 2009 – 10:
Rs.
Expenses paid
1,60,000
Expenses paid in advance (Included in Rs.1,60,000)
40,000
Expenses not yet paid
20,000
Income received
2,40,000
Income received in advance (Included in Rs.2,40,000)
30,000
Income not received yet
24,000
Find out the net income of Mr. Ashok if he adopts (i) Cash Basis, and (ii) Accrual Basis of Accounting.
Solution:
(i) If Cash Basis of Accounting is Adopted:
Revenues:
Rs.
Income received
2,40,000
Less: Expenses:
Expenses paid
1,60,000
Profit
80,000
(ii) If Accrual Basis of Accounting is Adopted:
Revenues:
Rs.
Income received
2,40,000
Add: Income not received yet
24,000
2,64,000
Less: Income received in advance
30,000
(A)
2,34,000
Expenses:
Expenses paid
1,60,000
Add: Expenses not paid yet
20,000
1,80,000
Less: Expenses paid in advance
40,000
(B)
1,40,000
Profit = A – B = Rs.2,34,000 – Rs.1,40,000 = Rs94,000.
