Original documents containing details about a business transaction are referred to as source documents. The source document contains vital information such as the date and time of the transaction and the parties involved.
Party name, amounts, date, and the nature of the transaction are also obtained/verified from the source document. It is typically possible to distinguish source document by their unique numbers in an accounting system. It is especially helpful to pre-number documents since it allows them to be investigated if any are missing.
A source document is indexed for ease of access and archived after the information in it has been recorded in the accounting system. The current year’s documents are usually stored on-site.
On the other hand, the older documents are stored at the off-site storage facility. So, they remain intact and can be utilized in any circumstances.
Source Documents for Accounting purpose
An accounting source document may include a receipt, bill, invoice, statement, and checks etc. Accounting and bookkeeping are inextricably linked to source documents. The source documents are automatically created whenever money is spent or received by a business. Unfortunately, many advisors have difficulty collecting and managing their clients’ source documents or do not do so.
So, as a business advisor, you need to learn how to implement an efficient system for collecting and managing source document by exploring their importance. Further, your work will be more accurate, faster, and of higher quality, if you have a system for collecting and managing your clients’ source documents. Additionally, you will be able to assist your clients in making better business decisions.
Types Of Source Documents
Here are some of the examples for source documents.
Source documents typically contain the following information in their simplest form:
- Date of transaction
- The total amount for the transaction
- Complete description for the transaction
- Authorized signatures of signatories
The most common types of source documents are listed below for you to consider and have a look at.
- Deposit Slips
- Cash memos
- Bank Statements
- Payroll Reports
- Leases & Contracts
- Check Copies
- Credit memos
- Sales Tax Returns
- Employee time cards
- Bank statement
- Sale or Disposal of an Asset
- Amortization Schedules
- Deposit slips
- Credit Card Statements
- Purchase orders
Source Document Examples
Paper trails are created when businesses make financial transactions. These documents are referred to as source documents. A perfect source document is considered an essential element in making the claim standable against any party in the court of law. It is sometimes necessary to provide a bookkeeper or accountant with a source document to accurately verify the data and record the transactions.
Let us consider the example of a sales invoice to have a perfect idea of what a sales invoice is.
Sales invoices are prepared by sellers of goods on credit. Each copy is delivered to the buyer as the first, but the seller retains the other copies. The seller retains a copy in case it is needed later.
In addition to the buyer’s name, the sales invoice includes the description of the goods to be sold, such as price and quantity of units, as well as the tax.
Also read, drawings in accounting
Source documents are created during the completion of financial transactions. These documents contain details of the transaction like the date, amount, and parties involved. These documents act as evidence for the execution of the financial transaction.
These documents are considered an important constituent of the financial record and help the auditor collect sufficient and appropriate audit evidence.