Types Of Accounting Source Documents In Bookkeeping

source documents accounting definition

In this case, the seller notifies the buyer that in their accounts they have increased the amount what the buyer owes to the seller. Formally, it can serve as a request for extra payment from the buyer, e.g. when there were changes to the original invoice. A purchase order is a source document issued by the buyer to the seller. Initially, it requests a product or a service, but it is a binding agreement once the seller accepts the purchase order. When a company sells any product or service to another party, it issues an invoice or a bill.

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  • Learn how to use technology to build a people-first accounting or bookkeeping practice.
  • There are many business transactions occur every day in an entity and those transactions are records and control by different sources of documents.
  • There is no universal agreement as to which collection of business documents comprise a comprehensive set of accounting records.
  • There are typically two methodologies when it comes to source documents and bank reconciliation.
  • Create an environment in which payroll, petty cash reimbursements and travel reimbursements are processed in a timely manner.

The receipt contains the names of the two parties involved in the transaction, the date, the amount of money transferred and the currency. They are the source of the information that is recorded in the accounting ledgers, and they are used to verify the validity of the transactions. A check counterfoil is the part of the check kept by the drawer of the check as a record of the transaction – a record that the check was written and the payment was made.


Journals can cover all of the entire transactions of a company or there can be different journals for different areas of the firm. The only necessity is that journals are kept up to date and that all the transactions are recorded in some manner. Certain regulatory bodies require companies to keep their accounting records for several years in the event that they need to be reviewed.

source documents accounting definition

In some states, accounting bodies set rules on dealing with records from a presentation of financial statements or auditing perspective. Rules vary in different countries and different industries have specific record-keeping adjusting entries requirements. Credit Voucher these are prepared to record the transactions involving cash payments, i.e. when payment is made. Supporting vouchers these are also known as source vouchers or source documents.

It accumulates hours-worked information from employee timesheets, which is then included in customer invoices that in turn result in the creation of a sale and accounts receivable transaction. Thus, in this situation, the timesheet is the source document for a sale transaction. The original goods received note is sent to the seller, and a copy of the goods note is retained by the buyer to support the double entry bookkeeping transaction. Purchase orders are accounting QuickBooks source documents issued by a buyer to a seller setting out details or the goods or services the buyer is ordering from the seller. A contract is formed when the seller accepts the purchase order. A similar adjustment will have to be made in the books of Maiden to reflect the fact that they still owe Acme the price of the CDs. In a very small business which buys everything for cash, the only record of a purchase will be the till receipt for payment.

Sales Documents

The invoice shows the description of the product, the parties involved in the transaction, the date, the quantity and the price. Accounting source documents can be categorized also as internal or external, depending on if they were generated within the company, or received from another party (e.g. seller of goods). Likewise, every company must have a procedure about the source document destruction policy. This procedure helps organizations to control the elimination of such documents for a certain period of time. Where checksare used by a business to make payments,check counterfoilsserve as the source documents. A check is a common form of payment, instructing a bank to transfer money from one bank account to another.

source documents accounting definition

A blank space should be left after each entry to make each set of journal entries stand out clearly. The total in each column will be debited to the purchases account, stationery account, carriage inwards account, motor expenses account and electricity and Gas account in the general ledger. The analysis shows all invoices for transactions that will not be paid for immediately. Trade discount is a discount given to a trader buying in large quantity. The invoice price would be the same for all customers but the net selling price may be different for customers depending on the quantity purchased by them. In the first week of September 2006 Victor Enterprises issued the following invoices to his customers. They record the total of transactions in one place rather than the individual accounts.

What Information Should A Source Document Contain?

Cash Vouchers are vouchers that are prepared at the time of receipt or payment of cash. This document serves the purpose of providing an evidence that on particular date, a specific amount has been deposited in the bank. When a depositor deposits money in the bank account, he fills up a form provided by the bank containing the information about the date, amount to be deposited and the name of the depositor etc. Official Receipt is a document confirming confirmation that a payment has been received. This is usually in respect of cash sales, eg a till receipt from a cash register.

As you can see, all of the source documents are used to ensure that only proper goods are ordered, received, and paid for. Accounting source documents may include loan or lease agreements with attached payment summaries that show the total amount due plus interest and administration fees. The bank will make a record of the payment so that it shows up on the payor’s bank statement as a payment received, and on the customer’s bank statement as a payment made. A check is a special bank note that represents the cash that is being paid by the customer.

To issue the quotation, most of the companies require a specific requirement from the customers first. For example, type of product, and the number of units they expected orders. For example when the time, materials and skills required for each job vary according to the customer’s needs. Quotations can’t be changed once they have been accepted by the customer.

source documents accounting definition

Cash Vouchers which are prepared at the time of receipt or payment of cash are known as cash vouchers. A credit note is made out evidencing that credit has been granted to a debtor. It contains details such as to whom goods are sold, quantity of goods sold and the total sale amount.

The Difference Between A General Ledger And A General Journal

Did you know a large number of people looked for ready-made source documents accounting definition only today? Not just as the day is special for this industry – thousands of persons and organizations around the world managing their paperwork.

It’s a good idea for management to set up internal controls to make sure no unauthorized employees can use the data input devices. Since these devices provide direct access to the accounting system, it’s important that they are secured, so employees can’t fraudulently enter information. For example, an employee could scan the wrong barcodes during a purchase or exchange in an attempt to alter the purchase price. Another good example of an input device that converts physical information into digital data is a barcode scanner.

Note that the purchase order and dispatch note are not records from which accounting transactions should be entered, since they do not create or satisfy financial obligations. They are useful when calculating accruals for final accounts, but the main reason for including them here is to alert you to their existence so that you do not confuse them with other documents. On a practical level, the original invoices and credit notes are of course sent to the customer. You may be working from a copy, or in some cases simply from a computer listing of transactions within the accounting system. A bank statement is used to enter payments into the accounting system and match them to invoices.

Purchase Documents

The invoice will typically show particulars of the goods or services sold, including the parties to the transaction, terms of payment, the date, quantity, and price. Finally Maiden sends Acme a cheque for the amount owed, often using a payment slip that can be torn off the invoice. It is not normal in business for Acme to then issue a receipt for the cash received if it was in response to an invoice. Acme will enter the payment against the amount owed by Maiden, leaving nothing outstanding, and will pay the cheque into the bank.

There are 4 different types of purchase orders Standard PO, Contract PO, Blanket PO and Planned PO. Harold Averkamp has worked as a university accounting accounting instructor, accountant, and consultant for more than 25 years. He is the sole author of all the materials on AccountingCoach.com.

A receipt is proof that the payment has been made, which is a good idea when paying cash. After that an order will be placed and the winning supplier will turn the quote into a sales invoice. These documents get their name from the fact that they are the origin of the information that is recorded into the accounting books. They come in many different shapes and sizes, but they can be split into three categories. The goods received note can be sent to the seller when the transaction has been completed. It is used to match received goods to invoices received from vendors. It also shows the name of the parties involved in the transaction, the description, the quantities of items in the transaction, the date, and delivery location.

The goods received note is like the delivery note, but in this case, it will be issued by the buyer. The delivery note is a document that is sent together with a shipment of goods that provides proof that the goods or products have been delivered. A purchase order contains the description of the items, the quantities to purchase, the price, the delivery dates, and the payment terms. According to local legal regulations, a company must retain source documents for several years. A statement or statement of accountis an itemized report showing the amount owed by one business to another, as well as details of transactions between the two businesses. Instead of making payments by check, a business can make payments online or by other electronic means.

Check And Check Counterfoil

Receipt is an evidence of making the payment on account of any business transaction. This source document is prepared for showing the proof of giving any cash to the party on account of any business transaction. The purchases day book is the book of original entry used to record all credit purchases. The total therein is transferred to the debit of the purchases ledger at regular intervals. The period may be daily, weekly or monthly depending on the volume of purchases transactions. The details on purchases day book are got from incoming invoices. In the last chapter we said that the historical cost concept makes financial transactions to be objective because they can be traced to source documents.