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Daily transactions in bookkeeping

Bookkeeping means registration of all financial transactions in a company.

Registration of all financial activities comprises the company´s transactions. All such transactions must be registered in the bookkeeping.

Generally, you are under a duty to account:

  • Whenever you buy something/li>
  • Whenever you sell something
  • Whenever you settle an invoice for something you have bought on credit
  • Whenever a customer who you have granted a credit settles his/her debt

This may appear overwhelming. Usually, it is just a matter of once and for all getting the routines straight, thus securing a correct registration.

A voucher

Most transactions require some sort of voucher. A voucher is a piece of paper featuring information on the transaction. Various requirements apply to a voucher depending on the nature of the transaction. Some transactions do not require a voucher.

Registrations og vouchers

Registration of payments received and made is referred to as an entry.
Documenting a posting by a voucher, you give the voucher a number. The same number must appear in the posting. Auditing the accounts you can use this number to identify the voucher.

Vouchers are filed in numerical order in a ring binder.

Three types of transactions

There is a distinction between three types of transaction, even if the three terms are not used in the day-to-day bookkeeping.

  1. A purchase transaction is when you buy a product or a service
  2. A sales transaction is when you sell a product or a service.
  3. A payment transaction is when you settle your account with a supplier, when a customer pays you, or when you transfer money from one bank account to another.

If a purchase or sales transaction is made in cash, a payment transaction is part of that transaction. Oppositely, if the transaction is made on credit, the subsequent payment transaction is an isolated transaction as it is made later.

One of the reasons for making a distinction between the three types of transaction is that the requirements for vouchers differ.

1) Purchase transaction voucher

When buying a product or a service, you receive a bill (an invoice) from the supplier. This invoice, the original invoice that is, must be used for a voucher for the bookkeeping. This applies whether you buy cash or on credit - i.e. whether the payment is made on purchase or later.

Thus, a receipt, a copy of a cheque, etc. will not qualify for a voucher of a purchase transaction. It must be a bill - a so-called invoice, and it must be the original document, not a copy.

Only original vouchers
The reason for the requirement of an original invoice as documentation for expenses or purchase of goods, is, that normally there will only be one single original, while it is easy to make numerous copies of the same invoice. So, using the original invoice for a voucher of a purchase transaction you make sure that the transaction is only entered once into the accounts.

Of course you may risk losing the original invoice for which reason you will have to obtain a copy and use that for a voucher of the purchase transaction for the bookkeeping. This is inappropriate, but obviously, better than no voucher at all. As long as this is only a one-off event, no harm is done. Just make sure no mis-entries are made because of it.

A typical mistake in such cases is that the original invoice had actually already been entered, and by using a copy you thus end up having entered the same purchase transaction twice.

2) Sales transaction voucher

When you sell goods you make out a bill - in principle, that is. Because the type of bill necessary depends on the type of business you are running. Most retailers only make out bills to customers on request.

As the original bill has been handed to the customer, you use a copy (carbon copy, photocopy, or an additional print-out) for a voucher for the bookkeeping.

As we have just seen, entering purchase transactions into the accounts you use the original invoice for a voucher. And as there exists only one single original version of the invoice, you are sure to enter the transaction only this once.

Likewise, you must also make sure to enter sales transactions into the accounts only once. You do this by printing out all your sales invoices consecutively numbered. Only, you must ensure an uninterrupted chronological succession.

These sales invoices must be filed numerical order. At your own discretion you can make more copies of these invoices for other purposes. You may want to file copies of invoices along with your correspondence with the customers.

Cash register
Within retailing, e.g. shop sales, only rarely bills are made out to the customers. Thus, in order to comply with the rules, sales must be registered elsewise.

Normally, a cash register is used to register regular sales. The cash register accumulates the daily sales and registers each sales transaction on a cash register roll. At the end of the day the cash register totals the day´s registered sales.
The cash register can group sales into two or more product lines depending on the structure of the company´s bookkeeping.

So, as there are no real sales invoices, the cash register roll works as a voucher for the bookkeeping of the daily sales transactions. Usually, the total sales of the day are entered as one transaction or one for each product line if the cash register groups the sales into product lines.

Market trade
Market trade and similar sales from stands are a bit special. Traditionally, it is legal to register such sales indirectly.

To register sales indirectly means that you determine the day´s sales by deducting the morning cash balance from the day-end cash balance, factoring in payments received or made not relating to sales. T

his is not a very precise way to register sales, but when it is accepted all the same, it is probably out of recognition of the fact that such sales from stands would never work otherwise. The daily sales statement worked out this way functions as a normal voucher for the company´s bookkeeping.

Thus, you always use sales registration copies for vouchers for the entering of sales transactions into the accounts. So, the type of sales registration is merely a matter of business type.

3) Payment transaction voucher

There are many shapes of payment transactions. Payment transactions, that are not also purchase or sales transactions, include:

  • When your customers settle their credit sales invoices
  • Similarly, when you pay your supplier at a later time than on delivery
  • When making bank deposits (cash)
  • When paying instalments on your bank loan

Balance sheet accounts
Common for these examples is that, contrary to purchase and sales transactions, they do not set off an entry on a purchase, cost, or sales account. Payment transactions only set off entries on balance sheet accounts under assets and liabilities.

Not original voucher
The bookkeeping of payment transactions does not require an original voucher (nor a copy of your own sales invoice) - just some sort of verification of the transaction.
Vouchers of payments received from customers could be copies of receipts you may have produced. It could also be an entry on your bank statement, or maybe just an entry in your cash book.

Vouchers for payments made, which are not purchase transactions, are typically just copies of cheques, entries on a bank statement, etc.

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