CAT / FIA FFA Syllabus C. The Use Of Double-entry And Accounting Systems - Business transactions - Notes ^{1 / 4}

A business will enter many transactions during the year.

All of these need to be recorded and summarised to produce the business'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 or General 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.