Company makes a financial transaction at the time of business.
It generates some paper work.
Accountants call this paper work a source document.
When business firm writes a check from cheque books for office supplies, cheque and office supplies receipt become the source documents.
Source documents serve as evidence of the terms and conditions.
Both parties receive source of documents.
For example, at the time of goods sold, seller records this transaction in cash book and buyer receives purchase invoice and the business keeps a running tape of all transactions in the register.
It is necessary to standardize the forms and procedures for processing and recording all normal, repetitive transactions, the generation and handling of these source documents should be controlled.
All recognizable events are not supported by a standard source of document.
For certain events like insurance claim, source documents are essential otherwise organization cannot receive insurance claim or compensation.
From the bookkeeping point of view, source documents provide information needed for recording transactions in the accounts of business.
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The major importance of source documents are:
The source documents serve as the bases of recording the transactions.
They validate the business transactions.
They serve as a evidence in the court.
They act as the bases for taxation.
They act as the bases for the adjustment information.
They work as a future references etc.
There are different types of source documents, out of them some are mentioned below: Importance of source documents
An invoice or bill is a document issued by a seller to the buyer (exporter to importer) mainly in case of credit transactions.
Sales invoice issued by seller becomes purchase invoice to the buyer.
Invoice includes the different aspects of products like varieties of products, quantities, agreed prices, other expenses, the mode of payment and transportation etc.
Normally, three copies of invoice are prepared; one is sent to buyer along with the goods sold, another is sent to accounting department and next one is kept for reference purpose.
Debit note is also known debit memo.
Debit note is used to return goods on credit.
It is a commercial document issued by a purchaser to a vendor.
The purchaser usually issues a debit memo for the higher amount than the invoice.
Debit notes are generally used in business-to-business transactions.
This document is used by a purchaser to inform a vendor of the quantity of goods and amount of goods being returned.
Credit note is also known credit memo.
This document is issued by a seller to a buyer.
Usually, the seller issues a credit memo when there is lower amount than the invoice.
Then repays the money to the buyer or it is set-off against a balance due from other transactions.
Credit notes are also used for rectifying the over-charge, due to oversight and clerical errors.
Cash register tape is computerized paper role of goods sold in retail for cash.
Generally, large retail organization uses cash register tape like Bhatbhateni, Bigbazaar, Walmart etc.
It is an electronic device which is used to calculate financial transactions in paper role form.
Time card records short some information about employee and working department.
Time card records working pert day and working days in a month.
Payroll or personnel department prepares time card and sent to the accounting section for the payment of wages and salary.
When cash and cheques are deposited into bank, we should fill up cash/cheque deposit slip.
After receiving cash and cheque, bank cashier approved it with signature and stamp.
Bank keeps one part and returns other part of slip.
This slip is the source document for depositing amount into the bank.
When organization receives cash for any reason, cash receipt issues showing reasons.
It contains date, name of person or organization, received amount in words and digit, mode of payment (cash or cheque) etc.
It is the proof of cash or cheque received from client or customer.
Some other source documents are promissory note, cancelled cheque, expenses report, daybook, materials requisition form, sales receipt, credit card receipt, petty cash, packing slip etc.
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