Learn to read business documents like a real accountant!
Look at a business document and choose which TWO accounts change.
Every business transaction creates a document. As an accountant, you read documents and find the accounts that change.
| Document | What It Tells You |
|---|---|
| Invoice Received | We owe money (Accounts Payable) |
| Invoice Sent | Customer owes us (Accounts Receivable) |
| Receipt | Cash was received |
| Check | We paid with cash |
Read the document carefully. Look for key words. Think: "What did we get?" and "How did we pay?"
Every journal entry starts life as a piece of paper (or PDF). The chain has four steps:
RIVERBEND COFFEE COMPANY Asoke Branch — Bangkok Date: 2024-06-15 Receipt #: 887-221 ----------------------------------------- Large latte 150.00 Blueberry muffin 85.00 ----------------------------------------- TOTAL 235.00 PAID — CASH 235.00
Step 1 — Event: Customer buys coffee + muffin for cash.
Step 2 — Document: Cash sales receipt printed at the register.
Step 3 — Accounts: Riverbend Coffee GOT cash (asset ↑). Riverbend Coffee GAVE UP product in exchange for the right to recognize earned revenue (Sales Revenue ↑).
Step 4 — Journal Entry:
DR Cash ............................. 235
CR Sales Revenue ................... 235
(To record cash sale per receipt 887-221)
RIDGELINE COMPONENTS TECHNOLOGY GROUP 18 Harbour Industrial Road Bill To: Lumina Devices, Inc. Invoice #: RC-2024-90215 Date: 2024-04-12 ----------------------------------------- Tablet display assemblies 6,000,000 Processor chip packaging 4,000,000 ----------------------------------------- TOTAL 10,000,000 TERMS: Net 60 DUE: 2024-06-11
Step 1 — Event: Ridgeline Components ships parts that Lumina Devices will build into tablets.
Step 2 — Document: Purchase invoice received from Ridgeline Components.
Step 3 — Accounts: Lumina Devices GOT parts for resale (Inventory ↑). Lumina Devices GAVE UP a promise to pay in 60 days (Accounts Payable ↑). No cash moves yet — the "Net 60" line is the giveaway.
Step 4 — Journal Entry:
DR Inventory ................. 10,000,000
CR Accounts Payable ........ 10,000,000
(To record component purchase, invoice RC-2024-90215)
A source document always tells you four things:
Once you have those four pieces, the accounts and direction of change fall out almost automatically.