FAC1503 SUMMARY
STUDY NOTES 2021
(learning unit 2) This is an all-inclusive guide to FAC1503 SUMMARY
STUDY NOTES 2021 (learning unit 2).
The financial records of an entity only deal with transactions that are measured in monetary
terms. The duality of the financial accounting system better kno...
FAC1503 SUMMARY
STUDY NOTES 2021
(learning unit 2)
, Learning unit 2/2021
FINANCIAL ACCOUNTING PRINCIPLES FOR LAW PRACTITIONERS
LEARNING UNIT
2 DOUBLE-ENTRY SYSTEM AND SOURCE DOCUMENTS
Contents
Learning outcomes ................................................................................................................... 2
Key concepts ............................................................................................................................ 2
Acronyms ................................................................................................................................ 2
2. Introduction ...................................................................................................................... 3
2.1 The double-entry system ................................................................................................. 4
2.2 Summary of types of accounts and impact of transactions .............................................. 6
2.3 Descriptions of individual accounts .................................................................................. 7
2.4 The basic accounting equation ........................................................................................ 9
2.4.1 Right-hand side and left-hand-side of BAE ........................................................... 9
2.4.2 How to apply the basic accounting equation ....................................................... 10
2.4.3 4-STEPS to determine the result of a transaction ............................................... 11
2.4.4 Examples illustrating the application of the double-entry system ....................... 14
2.5 Recordkeeping ............................................................................................................... 22
2.5.1 What is the accounting cycle? ............................................................................. 22
2.5.2 Completion of source documents ........................................................................ 24
(a) Internal source documents.......................................................................... 24
(b) External source documents (also referred to as supporting documents) .... 25
2.5.3 Recording of source documents .......................................................................... 26
2.6 Overview of the recording of transactions ...................................................................... 40
2.7 Completion of books of first entry................................................................................... 40
2.8 Self-assessment exercises ............................................................................................ 41
2.9 Terminology and definitions – cheat sheet ..................................................................... 44
The key to success in accounting is practice, practice and more practice.
The following concept cards are available for this learning unit:
CONCEPT o Effect of transactions on specific types of accounts
CARDS
o The accounting cycle (x2)
o Overview of the recording of transactions
1
, Learning unit 2/2021
Learning outcomes
After working through this learning unit, you should be able to:
define cash transactions
define source documents
explain the difference between internal source documents and external business
documents
explain the applicable source documents involved in different cash transactions
complete different business documents
Acronyms
BAE Basic accounting equation
LPA Legal Practice Act 28 of 2014
LPC Rules Legal Practice Council Rules
2
, Learning unit 2/2021
2. Introduction
The financial records of an entity only deal with transactions that are measured in monetary
terms. The duality of the financial accounting system better known as the double-entry system
is a method whereby the transactions are recorded systematically to show the giving and
receiving of value.
The accounting cycle details the formal accounting process. The steps discussed in this
learning unit are as follows (indicated by yellow shading):
Transactions ― The accounting process starts once a transaction has taken place.
Source documents ― Source documents provide the evidence for a transaction having taken
place
Books of prime entry ― The source document is prepared and the information is entered
into the books of prime entry
Ledger accounts ― The entries from the books of prime entry are posted to the
general ledger, creditors’ ledger, and debtors’ ledger.
Trial balance ― The trial balance is drawn up from the accounts in the
general ledger
Financial statements ― The financial statements are drawn up from the trial
balance
Please remember the following points at all times:
RECAP Total debits in the transaction must equal the total credits in that
transaction!
For every debit, there must be a credit!
Debits are on the left, credits are on the right!
The equation must balance!
3
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller STUDYCENTER2024. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R61,59. You're not tied to anything after your purchase.
