It comes from the source, meaning the source of the document. The source accounting documents or simply source documents are financial document which provide financial details about a company. Consider this, whenever there is a financial purchase or a slip from the supplier, it creates a financial trial, and this financial trial is referred to as source accounting document. This financial trial is very important in accounting sense. It helps accountant keep track of financial records and help them in bookkeeping furthermore, in the times of financial distress, it also helps keep track of any financial irregularity.
This means that the source documents are also an important source of financial audit.
Important points regarding source accounting documents
There are some important points regarding source accounting documents which must be kept in mind. The important points are given as follows:
- The source documents must be first recorded somewhere, like in excel, and then their physical copies must also be stored.
- While it is helpful to have original document, under the regulation by the internal revenue service of IRS of the United States of America, copies of the original copies are also submittable in most cases.
- It can be helpful to keep track of the source accounting documents under different software.
Main types of Source accounting documents
While there are many types of source accounting documents, the five main types of accounting documents are shown in figure 1.
Figure 1: Main types of source accounting documents
The five main types of source accounting documents shown in figure 1 are Quotes, Order, Dockets, Invoices, and Notes. All five of them can be further divided into multiple types. The details of all the five types of source document are given below:
Quotes are self explanatory. Quotes are the source accounting document created when a business asks a supplier for quotes. This can be quotes about raw materials, products, or service. For example, if supplier is a manufacturer, it will be a product, while if the supplier is a law or accounting firm, the quote would be for a service.
The other type of quote would be from a business, which is in this scenario the supplier, to another business.
So, the same quote can go both ways. It is a very useful source accounting document, as every dealer may be quoted a different price depending upon the size of the order, term of the dealers, and the relationship with the supplier or the orderer. This means that every employee of the business quote the same price so there is no miscommunication between the suppliers.
Consider that you are running a business when ordering from a supplier. When you receive the order, you will also receive purchase order foam. This contains all the details regarding the purchase from the supplier. Number of orders, size, dimensions, purchase price, delivery time, who received the order, who delivered the order etc.
The order foam is called a purchase order foam when received by the business, and sale order foam when received by the supplier. The order foam is one of the most important source accounting documents. During an audit of a warehouse, these are seen as the most important piece of the puzzle to track missing products. It provides clear and concise details about the delivery order. As it is checked by both supplier and buyer, it reduces any margin of errors.
Delivery dockets are a list of products shipped by the supplier. It is a source document which helps accounts for any misappropriation from the supplier side. An employee receives a delivery docket, and checks it against the order the supplier has just shipped. The employee can count the number of products and match it with the amount written in the delivery docket. It is a fast and quick method for matching the shipments from the suppliers.
It helps in quickly resolving any issues by just contacting the supplier. It also helps in reducing any uncertainty about manufacturing. In just in time production method, all the suppliers must be in sync, and if even a single part is not available, it can stop the whole production line. To avoid any such issues from arising, the delivery dockets shipping documents can prove to be extremely useful.
Invoices are sourcing documents of purchase and sale. So, there are two main types of invoices.
4.1 Purchase Invoices
When we purchase something, we get a receipt, it is also called Purchase invoice. It is a record of our purchase. If we do not pay the supplier at the time we purchased it, the supplier will keep the purchased invoice.
4.2 Sales Invoice
The opposite side of the purchase invoice is the sale invoice. The sale invoice will be kept by the purchaser. It helps in tracking all the purchases by the business. It is a very important of bookkeeping.
Consider that you are a supplier, and the buyer returns the item that he/ she purchased. It means that buyer has to be refunded. This will show in the books as notes. It is very important in double entry bookkeeping. It helps keep track of money owed and other businesses who owe money. There are two main types of notes:
5.1 Debit Notes
This is noted as debit note in the supplier’s book as the refund comes up as an amount owed to the buyer.
5.2 Credit Notes
This is same as the debit note. But, the only difference is that is noted in the books of the purchaser.
Source documents are an important source of accounting. These documents play a pivotal role in keeping track of all financial transactions of a business. These documents also play a very important role when financial audits of a company are conducted. Without these documents, it is nearly impossible to keep track of anything the purchases or sales, salaries etc of a business.