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SOURCE DOCUMENTS
 DEFINE SOURCE DOCUMENTS
 FEATURES OF SOURCE DOCUMENTS
 TYPES OF SOURCE DOCUMENTS
 PURPOSE OF EACH SOURCE DOCUMENTS
 IMPORTANTCE OF SOURCE DOCUMENTS
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Definition of Source Documents
 The documents recording the transactions are referred
to as Source Documents. Therefore, a Source
Document is a document that provides written
evidence of a particular transaction as it occurs.
 Types of source documents include are sales invoices,
cash receipts, cash register slip, credit notes and
deposit slip.
 Source documents provide documentary evidence of a
business deal or accounting event and are a critical
part of an audit trail.
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5.3 Background to Source Documents in Accounting
 All manufacturing systems are identified by their three key
elements:
1.Inputs – Source documents (data from source documents)
2.Processes – double entry bookkeeping system
3. and Outputs- financial statement
ACCOUNTING INFORMATION SYSTEM
INPUT
Source documents
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PROCESS
Double Entry
Bookkeeping
OUTPUT
Financial Statement
5.4 Importance of Source Documents
 Source Document contain relevant information in the form of
written evidence of transactions at the time they occur. It means
the documents contains exact details of what happened between
the seller and the buyer. (written evidence)
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Source documents perform following tasks:
provides details of the source of revenue,
provides details about the customers,
shows the number of items sold or type of service provided,
shows the pricing strategy,
shows the date on which the transaction took place,
protects the business from unnecessary deficiencies.
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5.5 Features of Source Documents
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Names and addresses of parties involved
money value of the transaction,
the amount of any taxes,
description of the subject matter of transaction (nature
and purposes),
date on which the transaction occurred,
the special terms and conditions of the transaction(i.e
discount, payment and delivery details)
authorized signature for payment or acceptance of
goods/services.
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5.6 Types of Source Documents
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Purchase order/order form
Delivery note and consignment note
Invoice
Credit notes
Statement of accounts
Cheque
Receipts
Bank statement
Remittance advice
Sales order
Counter/cash Sales Docket
1. Purchase Order/Order form
Is a commercial document issued by a buyer to a seller,
indicating types, quantities, and agreed prices for products or
services the seller, indicating types, quantities, and agreed
prices for products or services the seller will provide to the
buyer.
Information would show in the purchase order
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Order number for reference
Quantity and description of goods
Prices of the goods
Suppliers reference number
Any delivery instruction
Terms of payment
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2. Delivery Note and Consignment Note
A person delivering the goods usually issues a delivery note.
It contains goods which have been delivered.
It is important that:
 The buyer checks all goods listed on the delivery note
 .The buyer will keep one copy and sign the duplicate
 Consignment note is used when goods are delivered by a
delivery agent on behalf of the supplier. The buyer must
sign the duplicate that will serve as a proof that the goods
have been delivered.
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3. Invoice
Invoice is a commercial document issued by a seller to the buyer,
indicating the products, quantities, and agreed prices for products
or services.
From the seller point of view (Sales Invoice)
From the buyer point of view (Purchase Invoice)
A typical invoice contains:
 The word invoice (or Tax Invoice)
 A unique reference number
 Date of the invoice, Tax payments (e.g GST or VAT)
 And etc.
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4. Credit Note
A credit note or credit memorandum (memo) is a commercial
document issued by a seller to a buyer. The seller usually issues a
credit Memo for the same or lower amount than the invoice and
then repays the money to the buyer or sets it off against a balance
due from other transactions.
Reasons for issuing
 A buyer was over charged on the invoice,
 Buyer returned goods to seller. The goods may have been
damaged or goods which were not ordered in the first place or
errors or allowances.
 Empty containers returned back to suppliers
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5. Statement of Accounts
 It is a document which is issued by suppliers to the
buyers on a monthly basis. It shows the summary of
the preceding month’s transactions including
outstanding balances.
 The statement of accounts may show;
1.Opening balance owed at the start of the month
2. invoice totals of goods purchased
3. Credit notes issued and any discounts allowed
4. closing balance owed at the end of the month.
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6. Cheque
 A cheque is a document/ instrument (usually a piece
of paper) that orders a payment of money from a bank
account.
 The person writing the cheque is called a drawer.The
drawer writes the various details including the money
amount, date and payee on the cheque, and signs it,
ordering their bank, known as the drawer, to pay that
person or company the amount of money stated.
 Cheques are a types of bill of exchange and were
developed as a way to make payments without the
need to carry large amounts of goods and silver.
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The four main items on a cheque
are:
1. Drawer, the person or entity who makes the cheque
2.Payee, the recipient of the money
3. Drawee, the bank or other financial institution where
the cheque can be presented for payment.
4. Amount, the currency amount
When a cheque is mailed, a separate letter or ‘remittance
advice’ may be attached to inform the recipient of the
purpose of the cheque .
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7.Receipts
 A receipt is a written or printed acknowledgement or
evidence that a specified article or sum of money has
been received as an exchange for goods/ services. This
receipt is issued by suppliers to buyers only when
goods or services are paid using cash.
 A receipt shows the following details; date of
transactions, amount of money paid, type of goods or
services provided. A receipt is not issued when
payment is made by cheque.
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8. Bank Statement
 An account statement or a bank statement is a summary
of all financial transactions occurring over a given period of
time on a deposit account, a credit card, or any other type
of account offered by a financial institution.
 It features; cancelled cheques(or their images), that cleared
through the account during the statement period,
promotional inserts or important notices about changes in
fees or interest rates. Thanks to online banking, financial
institutions offer virtual statements, also known as
paperless statements or e-statements.
 It should be noted, although popular for customers,
paperless statements are a way for a bank to reduce costs.
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9. Remittance Advice
 It a letter sent to a customer to a supplier, to inform
the supplier that their invoice has been paid. If the
customer is paying by cheque, the remittance advice
often accompanies the cheque.
 Remittance advices are not mandatory, however, they
are seen as a courtesy because they helps the
suppliers' accounts receivable department to match
invoices with payment. The remittance advice should
specify the invoice number(s) for which payment is
tendered.
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10.Sales Order
 It is an order issued by a business to a customer. A
sales order is an internal document of the company,
meaning it is generated by the company itself. A sales
order should record the customer’s originating
purchase order which is an external document.
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11.Counter/ Cash Sales Docket
 This document is issued by sellers to buyers when
goods are sold over the counter. It serves the same
purpose as receipts.
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End of Chapter 5
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