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What action is to be taken where no source documents exist?

  • 53 posts
  • # 105727

Hi everyone,

I am going through the various topics for Papers B1 & B2 and have come across the above under the Assessment Criteria. I have looked in text books and tried Googling the answer but to no avail. Can anybody point me in the right direction please?

Kind regards,

 

Karen

  • Fellow PM.Dip
  • Practice Licence
  • 33 posts
  • # 105770

Hiya, I am guessing (having not done the new syllabus it is a guess!) this relates to issues where documents are missing or lost

Try googling accounts with incomplete records, there is a link from CIMA that has good diagrams to explain it. 

http://www.cimaglobal.com/Thought-leadership/Newsletters/Velocity-e-magazine/Velocity-2012/Velocity-august-2012/C02-financial-accounting-fundamentals--incomplete-records-part-one/

Hope that is some help, good luck

sarah x 

  • 56 posts
  • # 105786

Hi Karen,

 

Additional notes on this are:

 

Proper maintenance of source documentation is a key and often overlooked factor to ensure proper and accurate transactions are posted to the Bookkeeping system.

Each time a company makes a financial transaction, a paper/online trail is generated. This  trail is  ‘source documents. If a small Business processes payroll for its staff, for example, the source document is the payroll report with approved timecards.

Source documents contain the details that Bookkeepers need to post transactions correctly. Additionally, source documents are the evidence that a financial transaction occurred during a subsequent audit.

Good source documents should describe all the basic facts of the transaction such as the amount of the transaction, the parties involved, the purpose of the transaction, and the date of the transaction.

Good examples of common source documents include:

  • 'Paid' cheques /BACS/CARD payments on a bank statemnet

  • Invoices

  • Leases & contracts

  • Credit notes for a customer refund

  • Deposit slips

  • Purchase orders

     

    It is critical that a Business receives good financial information.  Source documents are the foundation of this.

     

    When a source document does not exist, for example, when a cash receipt is not provided by a Vendor, or is misplaced, a document should be generated, as soon as possible after the transaction, using other documents such as bank statements to support the information on the newly generated source document.

     

    Once  a transaction has been posted in the books of a Business the relevant source documents(s) should be filed and made retrievable so that transactions can be subsequently verified should the need arise at a later date.

     

     Kind regards

            Brian

 

  • 53 posts
  • # 105787

Hi Sarah and Brian,

 

Thank you so much for taking the time to answer my query. The information is just what I was looking for.

I was wondering what would happen as certain transactions would have taken place having shown up on a bank statement but the source document might not be there. Obviously, HMRC doesn't allow you to claim VAT against purchases without valid VAT invoices which got me thinking as to what would happen to everyday transactions that had taken place but no source document to back it up. This has now been cleared up with your information Brian.

Thank you both. I really appreciate it.

 

Kind regards,

 

Karen

 

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