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ACCT 301
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Chapter 14 The process of bookkeeping begins by the issue or the receipt of source documents, such as invoices, purchase orders or sales orders. Once invoices are issued or received, the details of that particular invoice are recorded in the appropriate book of prime entry. The books of prime entry are summarized above with the inclusion of the journal, which is shown separately for illustrative reasons only. Well, whenever a sale is made, the details of the sales are recorded in the sales day book, and similarly for purchases. Sales returns or purchase returns are similarly recorded in their own books of prime entry. Any cash related payments or receipts are recorded in the cash day book, which includes bank related transactions as well. A separate book is kept for petty cash since most businesses keep a small amount of cash on the premises to make occasional small payments in cash, e.g. postages, taxi fares, etc. the petty cash account can also be the resting place of occasional small receipts, such as cash paid by a visitor to make a phone call, etc. As one may imagine, although the amounts involved are small, petty cash transactions still need to be recorded, otherwise the cash float could be abused for personal expenses! Furthermore, under what is called the imp rest system, the amount of money in petty cash is kept at an agreed sum or ‘float’. The imp rest system is a system where a refund is made of total cash paid out in a period. E.g. if the float is agreed to be at $250, then at the end of the period, whatever is spent, would be refunded back from the cash account. Sales or purchases on credit are not only recorded in books of prime entry, such as the sales or purchase day books, but they are also recorded in what is known as memorandum accounts or personal accounts. As such, these accounts contain the balances outstanding for each personal debtor or creditor. These books aren’t a part of the ac
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