Introduction to Accounting Entries for a Business
Senior 2 · Entrepreneurship
Introduction to Accounting Entries for a Business
Lesson 1 of 5
18 min
Every business, from a boutique in Kimironko to a coffee cooperative in Nyamasheke, buys, sells, pays and gets paid many times a week. Memory cannot hold all of that. Accounting is the process of recording, classifying and summarising these money transactions so the owner, RRA, lenders and partners can see what really happened. Bookkeeping is the recording part, and it always starts from a piece of paper or an electronic record: a source document.
A source document is the original record of a business transaction. It proves that the transaction happened and gives the details that are written into the books: date, parties, items, quantities, prices and totals. Bookkeepers never record a transaction without one, and RRA can ask to see them during an audit.
| Document | Prepared by | Purpose |
|---|---|---|
| Quotation | Seller | States the price at which the seller offers goods, before any order. |
| Purchase order | Buyer | Formally orders goods from a supplier. |
| Delivery note | Seller | Goes with the goods; the buyer signs it to confirm they arrived. |
| Invoice | Seller | Bills a customer who bought on credit (to pay later), showing what is owed. The seller calls it a sales invoice; the buyer calls it a purchase invoice. |
| Receipt | The one receiving money | Proves that money has been paid. In Rwanda a registered seller issues an EBM receipt. |
| Credit note | Seller | Reduces what a customer owes, for example when goods are returned or the customer was overcharged. |
| Debit note | Seller (sometimes buyer) | Increases what a customer owes, for example when an invoice undercharged; some buyers send one to a supplier when returning goods. |
| Payment voucher | Business paying | Authorises and records a payment made by the business. |
| Bank deposit slip | Business depositing | Records money paid into the bank account. |
Written by Ganzaa. Mutesi runs a tailoring shop in Kimironko. Name the source document for each event.
Tip
Memory hook. Invoice = “you owe me”. Receipt = “you have paid me”. Credit note = “you now owe me less”. A credit note always moves in the same direction as the invoice it corrects: from seller to buyer.
Solution: A receipt.
Solution: An invoice (a sales invoice for the seller).
Solution: A credit note for 5,000 Frw, which reduces what the customer owes.
Solution: They are evidence for entries in the books; they are needed for tax audits (RRA's guidance says to keep records for ten years); they help settle disputes with customers and suppliers.
Summary
Sources and credits
The tailoring example and the practice items are written by Ganzaa.
This lesson adapts CC BY-SA material and is shared under CC BY-SA 4.0.
