FAF3
Syllabus C. The Use Of Double-entry And Accounting Systems C1. Double-entry Book-keeping Principles

C1a. Business transactions 1 / 4

Syllabus C1a)

Identify and explain the function of the main data sources in an accounting system.

Recording transactions

A business will enter many transactions during the year.

All of these need to be recorded and summarized to produce the entity’s financial statements.

The flow of information:

  1. Source documents

    Business transactions are recorded on source documents.  

    These documents are the source of all the information recorded by a business. 

    Examples include sales and purchase orders, invoices and credit notes.

  2. Books of prime entry

    The information from a source document is entered in Books of prime entry.

    These can be:
    Cash Book
    Sales Day Book
    Purchase Day Book

  3. Nominal ledger

    The totals of Books of prime entry for the week or month are posted to the nominal ledger.

  4. Trial balance

    Each month, journal entries will be made when monthly accounts are being finalised, then the ledger accounts will be balanced off and a trial balance extracted.

  5. Financial statements

    Trial balance is then used for the preparation of the financial statements.

trial balance diagram