Essence of financial records
Published On January 21, 2014 » 3365 Views» By Hildah Lumba » Business, Columns
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SMEs cornerThis week I revert to my education procedures and this time I sensitise the entrepreneurs on the aspect of the importance of financial source documents.

Financial records in a business set up are very important and most relied upon in as far as making business decisions are concerned. To create useful reports, financial information must be arranged in an organised manner.

Organised summaries of business financial activities are referred to as accounting records. Accounting is the language of business.

Failure to understand the accounting information can result in making poor business decisions on the part of business owners. Accounting knowledge helps managers and owners make better informed business decisions.

Entrepreneurs must be reminded here that keeping of business financial records in a proper manner will assist them to make better informed business decisions. For instance, it is very easy for a business to know exactly when to pay debtors, when the business knows how much is available at any time and how much it is suppose to pay.

Sometimes financial records can be supplied to the stakeholders such as banks when they requests for them at any time they need to process the loans.

Equally through proper keeping of financial records, the businesses will be able to know how much tax they will be able to pay to the Government at un appropriate time.

For business records to be developed there’s need for a platform and this platform can only be developed starting with original documents called accounting source documents.

For a business to originate any business transaction in most cases is supported by documentations. For instance a business that sales its products through cash transactions must issue cash sale receipts to the customers and equally if a business sales a product on credit to its customer it issues a document called an invoice.

Sometimes the supplier may be requested to supply goods worth thousands of kwacha by the customer on credit. But before the supplier commits itself to supply the goods and to ensure that it is protected to do so may request the customer to issue a local purchase order (LPO).

All these original documents being referred to above are called source documents and are the bases on which business financial records are originated.

It is therefore important that business owners understand with knowledge when they are required to originate or receive these documents each time they are involved in any type of a business transactions.

Below we shall look at some source documents that a business may need to deal in during its business life span. We look specifically at a receipt

A receipt is a source document of proof which is given to customers by a supplier of either goods or services when the customers make a purchase using cash money.

However it is important to mention at this stage that a receipt is also issued in variety of situations when cash is received and it takes a different shape in the manner it is designed, but remains a receipt.

The different form of a receipt is designed and issued mostly depending on the nature of business being conducted. For instance a non governmental organisation (NGO) may design a receipt differently from the business that is involved in selling of goods or providing services.

Let us now take look at different types of receipts issued in a variety of situations.

1. Debtor’s receipt

This is a receipt which is given to the customer who had earlier obtained goods or services on credit but now settles a debt after an agreed time, It is actually an acknowledgement of a payment of a debt and its design should be different from the cash sale receipt given to a customer who buys goods on cash.

2. Cash sale receipt

This is a receipt which is given to a customer by the supplier of goods or services upon paying cash for a prompt purchase. It is important to note that the receipt comes in a different format depending on the kind of a business being enforced.

If the supplier is registered for value added tax(VAT) purposes this kind of receipt will also show the portion for VAT collected on behalf of the government and this happens to retail suppliers in this country.

From the point of view of the supplier who is also known as the vendor, the receipt issued is known as a cash sale receipt while the purchaser who is a customer, the receipt is viewed as cash purchase receipt.

3. General receipt

A general receipt is a source document that is used generally to receive unspecified income. For instance, money received as donations or a grant or any other unrelated income to the operation of a business such as a sale of an asset.

It is very important to the entrepreneurs to understand that the bases of financial information in a business depend on the proper organisation of original documents also known as accounting source documents such as

receipts,invoices, LPOs, credit notes, debit note cheques and deposit slips and for lack of space I can not describe each of them.

For any comments contact 0950458228 or email.wklpublications699@gmail.com

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