ACCOUNTING

Principles of Recording and Processing Financial Transactions

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Principles of Recording and Processing Financial Transactions

Q1.1) Purpose, context and format of books of prime entry

In simple terms, books of prime entry are manuscript where transactions are primarily posted; moreover, this process might be part of double entry system or might not be depending purely upon the principles of accounting used by the company. In addition to this, this method is known as a substitute inclusion under prevailing journal entry system and is viewed as extra proficient during the process of double entry accounting. Under physical accounting, system this method is be efficient in accelerating the entry procedure.

For instance, accountant does not need to worry about remembering accounts that are to be debited and credit, and does not required to inscribe the names of each entry in every single transaction that is recorded in general journal. Rather according to books of prime entry method, general journal has been set aside for recording uncommon and common accrual entries that are separated into particular cash receipt and cash payment. Some of the primary books of entry are sales daybook, purchase daybook, sales returns daybook, and various others.

Format of book of prime entry

The below format is the credit sales book of prime entry.

Date

Invoice

Customer

Sales Ledger folio

Total amount

Additional columns of analysis

24/7/2013

002121

Benam and Co

0131

$4500

002122

AWS company

0215

$5000

$9500

Q1.2) Purpose and context of range of business documents

Petty cash voucher

it is known as the little form which is utilized by company to record a payment done from a petty cash fund, further, these type of vouchers are known as pert cash receipts that can easily be obtained from the company supply office. Major items that are included in this form are (date, amount to be disbursed, receiver name, payment reason, signature from the authorized persons and others).

Invoice

This is a very common and a most important document that is used to record detail transaction between company and its client. There is no specific format of invoice as every organization creates its own format that could look appealing to the customers

Credit Note

This document is normally issued by organization to rectify any error present in the invoice (invoice overstated or understated), and to return complete payment to buyer in case of buyer returning the good. The basic advantage of credit note document is that it helps buyer or seller to adjust that account of each other according; meanwhile, sometimes both the parties utilize this document as a counterbalance for future dealings.

Remittance advice

This document is mainly sent by customer to their suppliers to enlighten them that payment has been done. In modern business environment these sort of advices are not given due importance by some companies still follows this process as an act of courteousness towards their supplier. However, remittance advice is considered as a useful tool that enables the companies to maintain and monitor their records of payments.

Q1.3) when authorization is required

According to basic concept, it is allowing individual, program, or process the right of entering in a particular place, viewing particular files, and ...