Business Analysis of Accounts

High School ・Business ・APA ・2 Sources

The source documents such as the credit note received or issued, the invoice received from creditors, and the cash sales receipt is required for a business transaction to occur. The entries from the document of origin is then copied to the books of prime entry. Source income information also easies the adoption of follow-ups principle for billing purpose. This document is cruciall because it gives the seller enough information for bookkeeping references and also helps the seller to give account should in case the good or the service fails to be rendered effectively and there is a need for refund (American Accounting Association's Financial Accounting Standards Committee, 2006).

The Petty Cash Book

A petty cash book is a system that tracks and tracks smaller purchases such as the postage expenses that cannot be recorded in the credit or check card payment. The petty cash voucher is usually raised by the cashier with the intention of seeking authority for payment. The payments are typically of smaller value and are used to meet petty expenses such as office snacks, bus fare, and fuel. The petty cash book shows:

  • Person approving;
  • Person receiving;
  • Date of payment;
  • Amount paid;
  • Reason for payment;
  • Authorized signature(s).

The individual who receives the payment after receiving the money returns a document that shows how the money was utilized, for example, bus ticket or the fuel receipt. The information from the petty cash book is transferred to the cashbook. From the cashbook, the information is transferred to the ledger account.

The Check

A checkbook that contains the checks is generally issued when a bank opens up a current account. The checkbook is an essential document because it enables the check holder to make flexible payments against the current account with the bank. When an institution issues the check to the creditors for payments, it authorizes the check to be honored by the bank against the company’s account with that particular bank. A check leaflet contains this information. The amount from the cashbook is transferred to the cashbook (Weil, 2017).

  • Person receiving;
  • Date of payment;
  • Amount paid;
  • Reason for payment;
  • Authorized signature(s);
  • Person approving.

Credit Note

This document is written by the company and issued to the client when some properties are returned to the company. The credit note is a business document that is issued for various purposes when the amount on the invoice is overstated. Secondly, credit notes are also issued when the goods that are sold to customers do not meet the specification prompting the buyer to return the good. Third, when the property sold spoil within the guaranty period. Lastly, a credit note is issued when the current discount rates have not been applied. The items on credit note include:

  • Name and address of the debtor;
  • Amount of credit;
  • Credit note number;
  • The reason for credit;
  • Name and address of the firm.

The credit note is used to notify the customer that a refund has already been credited to the debtor's account. This document also indicates that the company’s amount in the banks has already been reduced. In other situations, the credit note is usually issued when the company gives some allowance for the amount that the debtor owes the company. The reduction in the bank account amount is transferred to cashbook.


American Accounting Association's Financial Accounting Standards Committee. (2006). Financial Accounting and Reporting Standards for Private Entities. Accounting Horizons, 20(2), 179-194. doi: 10.2308/acch.2006.20.2.179

Weil, R. (2017). Financial accounting (1st ed.). Boston, MA: Cengage Learning.

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