To enter into a Transaction we need approval from our responsible managers. When, after having approval of a manager, transaction takes place, such transaction should be evidenced by a document. Because, to record a transaction into the books of account, a bookkeeper needs an evidence of proper approval of transaction and authorization of documents, therefore, a voucher is prepared on which all of the descriptions of the transaction are written up and with which all of the evidences of approvals and authorized document are attached. Such voucher is finally authorized by accounts manager which is then recorded in the books of accounts by a bookkeeper. To have a more clear understanding of the above paragraph, lets have a step by step example of purchasing an air conditioning plant for workshop.

1. Production manager will send a requisition to the general manager for air conditioning the workshop to improve the working environment.

2. The general manager will approve the requisition (if he gets convinced that workshop is in real need of air conditioning plant) and will send this approval to the purchase department.

3. The purchase department will call a tender and after having received several quotations the purchase department will place a purchase order to the vendor quoting lowest rate. (All of the above procedure is properly documented).

4. The vendor company (supplier) will send an invoice (purchase invoice) to the business along with the air conditioning plant. Such air conditioning plant will be inspected by the expert and finally the invoice will be approved for payment.

5. Now all of the documents along with the purchase invoice shall be send to the bookkeeping office where a voucher will be prepared and will also be approved by the concerned manager for recording this transaction in the books of accounts.

Source Documents:

Following are the few examples of Source Documents which are required to support different types of transactions.

- Transaction Source Documents

1 Sales Invoice issued

2 Purchase Invoice received

3 Sales Return Credit Note issued

4 Purchase Return Credit Note received

5 Cash received Cash Memo/receipt issued

6 Cash paid Cash Memo/receipt received

7 Leases/Hire purchase Agreements

8 Staff Salaries Approved Payrolls

9 Electricity, Gas, Water, Tele. Phone Metered Bills/Invoices.

- Recording in the Books

Approved voucher are recorded in the books of accounts, many businesses now a days use computers for recording of transactions. However, an understanding of book of accounts is necessary whether transactions are recorded manually or electronically. Basically, there are two types of books of accounts which are used to record the business transactions

1. Books of original entries.

2. Books of secondary entries.

These are further subdivided according to the needs of the business and/or complexity of the transaction.