Question

Select the most appropriate alternative.

Which document is prepared when the goods are sold on Credit
(a) Credit memo
(b) Cash memo
(c) Cash voucher
(d) Petty cash voucher

Answer 1

Credit memo

Explanation:
When goods are sold on credit, a credit memo is prepared by the seller. It is termed as invoice with reference to the seller and bill with reference to the purchaser of the goods. It includes details of the party, quantity, rate and total amount of goods sold, along with the date of transaction.

A cash memo is prepared when goods are sold or purchased for cash, i.e. cash receipts and payments.
A cash voucher is prepared for cash purchases or sales. It serves as the source document to record entries in the cash book.
A petty cash voucher is prepared for petty expenses of a business and on its basis, entries are recorded in the petty cash book.