Source document

In business accounting, a source document refers to any original record that provides evidence of a financial transaction. These documents may include invoices, receipts, purchase orders, contracts, bank statements, and other similar documents.

Source documents serve as the basis for creating accounting entries in a company’s financial records, such as ledgers and journals. They provide information about the amount, date, and nature of the transaction, as well as the parties involved.

Properly maintaining source documents is critical for accurate financial reporting and compliance with accounting regulations. Businesses must keep these documents organized and easily accessible for auditing purposes and to support their financial statements.

A source document is the first record prepared for a business transaction. Source document is an evidence in support of a transaction, also called voucher. Entries in the accounting books are always made from the source documents. Financial accounting records contain accurate financial information. All transactions taking place in the day-to-day working of the business must be recorded in the books of accounts as documentary evidence. Example – Cash sales recorded in the cash memo, the receipt made out by the payee when cash is paid to him, an invoice showing credit sale of goods. This business document is called the source document. Some important features of a source document are:

-Source documents must be preserved till the tax assessments and the audit of the accounts for the period are complete.

-Source document also serves as the legal evidence in case of dispute.

-Transactions recorded helps in assessing which accounts are to be debited and which accounts are to be credited.