Source Documents are the original sources of information that provide documentation (proof) that a transaction has occurred such as sales invoices (tickets), invoices from suppliers, contracts, checks written and checks received , promissory notes, and various other types of business documents. These documents provide us with the information needed to record our financial transactions in our bookkeeping records. If you recall, a transaction is any event or condition that must be recorded in the books of a business because of its effect on the financial condition of the business, such as buying and selling.
Source documents detail the particulars of transactions that include the date, name, address, terms, and product description among other relevant pieces of information. Types of source documents include cash receipts, canceled checks and invoices. Source documents may be paper-based business forms or electronic documents.
-They are used for initial input to the accounting system. The transactions they record can be entered into the first of the accounting records – the journals.
-They assist internal control of the resources of the business – making sure that there is documentary evidence that a transaction took place such as the purchase or sale of items and the receipt and payment of money (that is, it makes it more difficult for people to misappropriate or steal cash or other items).
-They are part of the audit trail for as long as those documents are required to be kept by law or policy. Of such, they are a part of the record keeping process.
Here is a summary of some types of sources documents and their uses:
Sales Invoice
This document is sent to request payment for monies owed, for goods that were delivered, or services that were rendered.
Features of invoice
Invoices are numbered to keep track of sent invoices
Invoice usually includes the following information:
-Name, address of seller and purchaser
-Date of sale
-Description of sale (goods or services)
-Quantity and unit price of what has been sold
-Details discount if it is provided
-Total amount of invoice plus sales tax if applicable
-Other (date of payment, terms of sale)
Purchases Invoice
This document is received in request payment for monies owed, for goods that were delivered, or services that were rendered. It is identical to The Sales Invoice but is called a Purchases Invoice when the purchaser receives it.
Credit Note
This document is sent by a supplier to a customer to reduce the liability of the customer. In essence it is a negative invoice that is issued when goods are returned, when there was an overpayment, or when some other event has occurred that has the effect of reducing the amount that the customer owes to the supplier.
Debit Note
This document is sent from a customer to a supplier to request a credit note in respect to an overpayment or return of goods.
Receipt
This is a written document that confirms that money has been received as a down payment, account settlement or installment.
Petty Cash Voucher
This Document records in numeric order the specific amounts paid out in petty cash, to whom the payments are made and for what purpose.