Every entry in the accounts starts as a business document: a piece of paperwork that proves a transaction happened. Before any figure is written into the books, something real has taken place. Goods have changed hands, a service has been delivered, or money has moved.

The document is the written record of that event. A bookkeeper uses it to decide what to record, when to record it and for how much. Knowing the main documents shows you where the figures in a set of accounts come from, and it makes the rest of IGCSE Accounting easier to follow.

The main documents

  • Invoice: a request for payment sent by the seller to the buyer for goods or services supplied on credit. It shows what was sold, the quantity, the price per unit, any trade discount and the total owed. The seller calls it a sales invoice. The same paper, received by the buyer, is a purchase invoice. It is one document seen from two sides.
  • Credit note: issued by the seller when goods are returned or an overcharge is corrected. It reduces the amount the buyer owes. It is often printed in red so it stands out from an invoice.
  • Debit note: sent by the buyer to the seller to ask for a reduction, for example when goods arrive damaged. It is a way of asking the seller to issue a credit note.
  • Receipt: proof that a payment has been made and received. It is written after the money has changed hands, not before.
  • Statement of account: sent by a supplier to a customer, usually monthly. It summarises the invoices, credit notes and payments over a period, and the balance still owing at the end.

A worked example

Imagine a small stationery supplier (invented for teaching). On 3 May it sends a customer an invoice for 100 files at RM4 each, a total of RM400. On 6 May the customer finds 10 files damaged and returns them, so the supplier issues a credit note for RM40.

On 20 May the customer pays the remaining RM360, and the supplier writes a receipt for RM360. At the end of the month the supplier sends a statement of account. It shows the RM400 invoice, the RM40 credit note and the RM360 receipt, with a closing balance of nil.

Each document matches exactly one entry the bookkeeper will make. That is why the paperwork and the ledger fit together so neatly.

Why documents matter

Documents are the source of accounting entries. An invoice tells the bookkeeper to record a credit sale.

A credit note tells them to record returns. A receipt confirms cash received.

Because documents are evidence, businesses keep them carefully and file them in date order. If a figure is ever questioned, the document is the proof. Tracing every number back to a document is called an audit trail, and examiners expect you to know which document does what and why it exists.

Documents and the books of prime entry

Each type of document usually goes into a particular book of prime entry. This is the first place a transaction is written down, before it reaches the ledger.

  • Sales invoices go in the sales day book.
  • Purchase invoices go in the purchases day book.
  • Credit notes the business issues go in the sales returns day book.
  • Credit notes it receives go in the purchases returns day book.
  • Receipts and payments are recorded through the cash book.

Grouping documents this way means the business does not make dozens of scattered ledger entries every day. It collects similar documents and posts neat totals. This first step keeps a busy set of books in order.

Common confusions

Students often mix up two pairs of documents. First, an invoice is not a receipt. An invoice asks for money and is written when goods are supplied.

A receipt confirms money and is written only after payment. A business can hold an unpaid invoice for weeks before any receipt exists.

Second, a credit note is not a debit note. The seller issues the credit note and the buyer issues the debit note.

They concern the same problem but travel in opposite directions. Getting these straight early saves marks, because one wrong document name can unravel an exam answer.

How this connects to what comes next

Whether a document exists depends on how the deal was made. A cash sale may produce only a receipt. A credit sale produces an invoice now and a receipt later.

So understanding cash vs credit transactions helps these documents make sense. Another document you will meet often is the bank statement, which the bank sends to show what has gone in and out of the account. Learn to read one in reading a bank statement.

Try it yourself

Exercise: Which document would a business issue in each case?

  • (a) It sells goods on credit.
  • (b) A customer returns faulty goods bought on credit.
  • (c) That customer finally pays what is owed.
Show the answer
  • (a) Selling on credit → the seller issues an invoice.
  • (b) Goods returned → the seller issues a credit note.
  • (c) Payment received → the seller issues a receipt.

Business documents are the foundation of everything else in accounting, so it is worth getting comfortable with them now. If you find it hard to tell them apart, one of our teachers can walk through a set of real-looking documents with you.

Together you match each one to its entry. Book a trial class.