1. What is the significance of source documents to the recording process? Give two examples of
source documents.
Source documents are known as documents which are used as proof to record a transaction. They
provide the evidence required to begin the procedures for processing and recording a transaction.
Source documents require not be hard copy and they can be provided from partiess either internal
or external to the company.
An invoice is the source document for a transaction of purchasing an inventory on credit. Another
example for source document is cash register tape, which is used by a retailer in order to recognize
a cash sale. (p.112)
2. What are four different forms of cash?
Account Receivable, notes, pe+y cash, deferred cash.
3. Explain what is meant by this statement: One company’s accounts receivable is another
company’s accounts payable.
It occurs when there is a transaction happening between two companies. For example, A Company
receives $20,000 of goods which is bought from B Company on credit. Therefore it will shown in
transaction that A company will record a $20,000 accounts payable and a purchase, and B company
recording a $20,000 accounts receivable and a sale. (Accounngcoach.com)
4. What is the meaning of the following statement? The choice between historical cost and current
value is a good example of the trade-o)s in accounting that must sometimes be made.
Historical cost means the original cost of an asset at that time, and used as a principle asset
recognition in the financial statement. Current value means the cash amount that is received in the
