A check is a unique bank note that serves as the customer’s payment’s representation of cash. When paying with cash, it’s a good practice to have a receipt as confirmation of payment. When purchasing goods from a store or an online retailer, receipts are typically automatically issued. Generally, source documents should be kept as long as they serve a useful purpose or until all legal and regulatory requirements are met.

• Basically, these documents substantiate the business transaction, whose entry is made in the books, as they are the first and foremost input to the accounting process.
• The invoice shows the description of the product, the parties

  involved in the transaction, the date, the quantity and the price.

• Each time a company makes a financial transaction, it generates some paper trail.
• A debit note is a document that records the fact that an invoice has been paid, resulting in a decrease in the amount owed to the supplier.

The original is delivered to the customer, and the duplicate is retained as a record in the business. They provide evidence of employee payment regardless of whether it was issued via a check or direct deposit. Source documents can be helpful to ensure that your accounting data is accurate.

What is a Source Document in Accounting?

The data in such documents help forecast, set pricing, and maintain accurate financial records. Retaining all source documents allows you to ensure that your books are up to date. All source documents should be stored, either physically or electronically, for future reference. An invoice is a bill that’s drawn for customers after how to create a unique instagram aesthetic that fits your brand purchasing goods or receiving services by the business. It’s an internal document sent to the customer after the item has shipped and helps to maintain cash flow and streamlines the accounting process. It is important to keep purchase orders well-organized and properly filed, as they are often used in auditing and tax reporting.

• When a business sells goods on credit, it will issue an invoice to the purchaser.
• Purchase orders, invoice source documents, and receipts form the backbone of the accounting books, containing all relevant details regarding each transaction.
• Your accountant can then accurately input all of the information into your financial statements.

This data includes the date of the transaction, the amount, the recipient, and a description. Your accountant can then accurately input all of the information into your financial statements. Credit card slips are a vital part of the accounting process, as they provide proof of payment and help to ensure that financial records are accurate. It is important to keep credit card slips well-organized and properly filed, as they are often used in auditing and tax reporting. It is also important to reconcile credit card slips with the statement issued by the credit card company, to ensure that all transactions are recorded correctly.

Step seven: Other Source documents for general purposes

They also provide the details of the transaction, including dollar amounts, the date of the transaction, the parties involved, and information as to the purpose of the transaction. Accountants use source documents to complete accounting journal entries about the transaction. If the journal entry is incorrect, it can make the entire accounting record inaccurate and cause tremendous problems for the business going forward. The examination of source documents, therefore, is a critical first step to keeping accurate accounting records. In accounting, the definition of a source document is a piece of paper that proves that a transaction has occurred.

A source document is also used by companies as proof when dealing with their business partners, usually in regard to a payments. Examples of source documents are cancelled checks, credit memos, deposit slips, expense reports, invoices, material requisition forms, purchase orders, time cards, and sales receipts. Now that you know what they are, it is time to discuss the importance of source documents in accounting. Your source documents affect many aspects of the accounting and bookkeeping process. When you carefully organize and maintain them, they provide you with an easy paper trail.

Business Source Documents

Having source documents readily available will make the reconciliation process easier and more accurate. It’ll also help to gather clean data that can be translated into business insights. A petty cash log is where you record petty cash expenditures and is part of a manual record-keeping system.

Shred all physical paperwork and ensure your cloud storage is empty, making room for more recent documents. There are a few things to consider when using source documents, which include how they’re stored, the formats that are acceptable, and how long the documents should be retained. This internal document generated by the vendor allows companies to keep track of the orders they fulfill. Recording sales orders is an important part of the sales process as it documents the reduction of inventory or materials available for future sales. It can also be electronic, such as an electronic record of the hours worked by an employee, as entered into a company’s timekeeping system through a smartphone. #receipt – adocument confirming confirmation that a payment has been received.

How Long to Keep Source 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 transactions within the accounting system. On the sale of goods on credit, the seller of the goods prepares a sales invoice.

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. Beyond these requirements, each company dictates its own security policies. It may be useful in the future to provide evidence in case of internal consultation, a lawsuit, or to provide better customer service. According to local legal regulations, a company must retain source documents

for several years. This is a written document issued by one person to another, to acknowledge that money or valuable property has been received.