Theory question 102
Source Documents(a) State three uses each of an invoice to the: (i) seller; (ii) buyer.
(b) State three advantages of dividing the ledger into different classes.
Show the model answer
(a)(i) Seller: source document for the sales journal; evidence of the sale and the amount the buyer owes; used to follow up/collect the debt and check the customer's account; record for audit and tax (VAT).
(ii) Buyer: source document for the purchases journal; shows the amount owed to the supplier and the terms (discounts, due date); used to check goods received against what was ordered; evidence for audit.
(b) Any three: allows division of work among several clerks; errors are easier to locate; speeds up posting and reference; makes control accounts and internal check possible; reduces fraud; quicker access to information on debtors, creditors and nominal items.
Give uses from both sides of the transaction, then benefits of splitting the ledger.