Source documents

What Are Source Documents?

The first step in the accounting process is recording of business transactions in the books of accounts as journal entries. Source documents are the basis on which the transactions are recorded in books of accounts. They are the origin or source of transactions. The origin of a transaction is in its source document. Source document provides the details of a transaction and acts as an evidence or proof that the transaction has taken place. Each transaction recorded in the books of accounts should have adequate documentary evidence to support it. Source documents are the documentary evidence providing detailed information about the transactions such as nature/description of transaction, date of transaction, amount of transaction, parties to the transaction, etc. Source documents are required in the audit of accounts and they also serve as a legal evidence in case of a dispute.

Types Of Source Documents:-

There are many types of source documents. Following are the commonly used ones:-

Cash memo:-
Cash memo serves as a source document for recording cash purchases and cash sales transactions.  When a company sells goods for cash, it issues cash memo to the customer. It issues original copy of cash memo to customer and keeps the duplicate copy with it. when the company purchases goods for cash, it receives cash memo from the supplier. Cash memo contains all the details of the transaction such as names of parties, quantity of goods, selling price, amount, date ,etc.

Invoice:-
Invoice serves as a source document for recording credit purchases and credit sales transactions. When a company sells goods on credit, it prepares and sends invoice to the customer which is called as sales invoice. (it is purchase invoice for the customer). It sends original copy of sales invoice to customer and keeps the duplicate copy with it. when the company purchases goods on credit, it receives invoice from the supplier which is called as purchase invoice. (it is sales invoice for the supplier). The invoice contains all the details of the transaction such as names of parties, quantity of goods, selling price, amount, date, terms of payment, etc.

Receipt:-
Receipt is an acknowledgement of payment received. Receipt serves as a source document for recording payment and receipt of money. When a company selling goods on credit receives money for the sold goods, it gives receipt to the customer. It gives the original copy of receipt to customer and keeps the duplicate copy with it. When the company purchasing goods on credit pays money for the purchased goods, it receives receipt from the supplier. The receipt contains details such as names of the supplier and customer, amount, date ,etc.

Debit note and credit note:-
When a customer returns some purchased goods to the supplier for being defective or for some other reason or if the supplier has overcharged for the goods, it prepares and sends a document called debit note to the supplier asking for a refund. Customer sends the original copy of debit note to supplier and keeps the duplicate copy. Debit note serves as a source document for recording purchase returns. Debit note contains details such as names of parties, particulars of goods returned, refund amount, date, reasons for return, etc.
After receiving the debit note from the customer, the supplier prepares and sends a document called credit note to the customer acknowledging the return of goods by customer and the refund. Supplier sends the original copy of credit note to customer and keeps the duplicate copy. Credit note serves as a source document for recording sales returns. Credit note contains details such as names of parties, particulars of goods received back, amount of credit, date, etc.

Cheque:-
Cheque is a written order drawn on a bank authorizing the bank to pay specified amount of money to the person named on the cheque. Every cheque book has a counterfoil in it.  Before issuing the cheque, the counterfoil is filled with the details of the cheque such as payee’s name, cheque number, amount of cheque, date of issue, etc. The counterfoil is for the future reference of the cheque issuer. It acts as a source document for recording the cheque issue transaction.

Deposit slip:-
Deposit slip is a form which is used to deposit money in the bank account either in the form of cheque or cash. Each deposit slip has a counterfoil which is returned to the depositor duly stamped and signed by the bank official. Bank retains the deposit slip. The deposit slip counterfoil contains details such as account number of depositor, name of depositor, amount of deposit, bank branch, date of deposit, etc. The counterfoil is for the future reference of the depositor. It acts as a source document for recording the cheque/cash deposit transaction.

 

 

 

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