Betty’s Bakery

Small Business Manual Accounting & Bookkeeping Practice Set

Step 2: Source Documents: Overview

An organization’s source documents are physical or electronic records that provide evidence of a financial transaction. They are used to support the entries made in the accounting system and they provide a detailed record of each transaction, including the dates, names, amounts, descriptions, and other essential information. Businesses group source documents into six categories: sales, purchases, cash receipts, cash payments, payroll, and miscellaneous.

Work to be Performed

The Source Documents for the company’s first month of operations are located at Step 2: Source Documents. Do not remove them from the manual. They have been grouped together into the six basic transaction categories. Review the various source documents to become familiar with each category. Each individual source document represents a business transaction that must be recorded into one of six journals discussed below as a separate line item using double-entry, debit and credit bookkeeping

Step 3: The Six Journals Overview

Manual accounting and bookkeeping utilize six Journals for each of the six categories of transactions. Each Journal is a record of every individual financial transaction that occurs in a business. It is where transactions are for the first time in the accounting process The journals provide a chronological listing of the six categories of financial transactions.

Each Journal is organized similar to a spreadsheet containing several columns. Debit amounts are always entered into the left column(s) and credit amounts are entered into the right column(s). Each transaction is entered on a single line and includes applicable information: date, invoice number, check number, name, and transaction debit and credit amounts. Each transaction is recorded in the journal as a debit to one account (left-side) and a credit to another account (rightside), in accordance with the principles of double-entry bookkeeping

Work to be Performed

The Six Journals for the company’s first month of operations are located in Step 3: The Six Journals (3.1). Remove the journals from the manual in order to work on them. Review and become familiar with the format of each one.

The six journals correspond to the six categories of source documents. Each journal is formatted with columns for debit amounts on the left-side and credit amounts on the right-side