The document having all the detail of business transduction is known as source documents. These are the evidences that what run in business in whole period. It is the initial step of accounting process.
Accounting source document is physical document that lists the detail of transaction, and kept in business as proof of those transactions.
All source documents would include items such as:
- Transaction date
- Name of business and people
- Description of transaction
- Reference number
Importance of Source Documents
- Provide evidences that which transaction has occurred.
- Give the detail about nature of transaction, amount and people involved, time, date etc.
- Source documents made auditing process easy and efficient.
Types of Source Documents
Following are primary source documents used by modern business organizations.
These are related to credit transactions. It is kind of document in which price, quantity of product sold, name of buyer and seller is maintained etc. Invoices have two copies original for customer or purchaser and duplicate as an evidence for business activity. When a trader buys something on credit so he receives a credit bill from supplier, so the buyer can enter this document as purchase invoice and seller can enter it as sale invoice.
Receipt is kept as confirmation about when goods or cash is received. The one who makes the payment receive original receipt and duplicate is kept for record. It contains all the information regarding transaction.
When goods are returned due to any reason to supplier than debit note is given to supplier by its buyer. The reason for this is to notify the seller that they have been debited after the goods return. It can also be used for over-payments in the business. It acts as source document to return outward journal. It contains the date, amount and reason for debiting the particular amount, also known as debit memorandum.
Characteristic of Debit Note
- Given by buyer to return the goods on credit.
- Purchase day book is updated on its basis.
- Reason for debiting the account is always mentioned
Credit note is send by a seller to its buyer in respect of reducing the liability of customers, it can also be used to show that can be refunded also. It tells us reduction in sale. It is also called credit memorandum or credit memo.
Characteristics of Credit Note
- Sales return book is maintained on the basis of this document
- It is send to tell that credit is made to account of buyer.
Pay-in-slip is a slip given by bank after depositing the money in bank. It contains the amount, number of account, date, and name of account holder. It acts as evidence for bank transaction of business. It tells that on which date how much amount is deposited into bank.
The slip on which details about transaction, date of cash sales and cash purchases of company amount is maintained is cash memo. It is only used for cash basis system.
The detail of wages and salary of employees has been maintained in this document in order to make the audit easy in order to compare expenses and revenues.
Check is document which shows inflow and outflow of money during transactions. Cheque given by customer is kept as an evidence to show that business transaction has occurred.
A written document which supports business transactions is called voucher. The process of debiting or crediting an account depends on the vouchers. It is prepared by an accountant and signed by an authorized person of organization. They contain a serial number so that vouching can be easy for audit. Vouchers may be receipt, payment and general.