Accounting Source Documents

Source Documents in Accounting

One of the fundamental accounting concepts is the verifiable and objective evidence concept which states that financial transactions should have adequate documentary evidence. Accounting source documents are a form of documentary evidence providing detailed written proof of financial transactions including, for example, a description of the nature of the transaction, the date, the amounts involved, and the various parties to the transaction.

 

Types of Accounting Source Documents

There are many types of accounting source documents which have evolved over time to suit different accounting and bookkeeping situations. The main and most common accounting source documents are as follows:

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Accounting Source Documents

Quotation

A quotation is issued by a seller to a prospective buyer and makes a written offer to supply goods or services at a given price.

Purchase order

Purchase orders are accounting source documents issued by a buyer to a seller setting out details or the goods or services the buyer is ordering from the seller. A contract is formed when the seller accepts the purchase order.

The purchase order will typically show particulars of the goods being ordered including, date, quantities, and agreed prices.

The original purchase order is sent to the seller, and a copy of the purchase order is retained by the buyer to support the double entry bookkeeping transaction in the accounting records.

Sales Order

Sales orders are issued by a seller in response to a purchase order received from a buyer. The sales order will typically show details of the goods being ordered date, quantities, agreed prices, and also refer to the purchase order from the buyer.

The original sales order is sent to the buyer, and a copy of the sales order is retained by the seller.

Delivery Note

Delivery notes sometimes referred to as goods dispatched notes, are accounting source documents prepared by the seller to show that goods have been delivered to the buyer.

The delivery note will normally show particulars of the goods delivered, the parties to the transaction, the date, and quantity of products delivered.

The original delivery note is sent to the buyer, and a copy of the delivery note is retained by the seller to support the double entry bookkeeping transaction.

Goods Received Note

A goods received note or goods inwards note is an accounting source document prepared by the buyer to show that goods have been received from the seller.

The goods received note will typically show particulars of the goods received, the parties to the transaction, the date, and quantity of products received.

The original goods received note is sent to the seller, and a copy of the goods note is retained by the buyer to support the double entry bookkeeping transaction.

Invoice

When a seller sells goods on account to a buyer it issues an invoice. The invoice will typically show particulars of the goods or services sold, including the parties to the transaction, terms of payment, the date, quantity, and price.

The original invoice is sent to the buyer, and a copy of the invoice is retained by the seller to support the double entry bookkeeping transaction in the accounting records.

In the hands of the seller, the invoice is referred to as a sales invoice (as the seller has sold goods). In the buyer’s hands the invoice is referred to as a purchase invoice (as they have purchased goods).

Further details and an example format of an invoice can be found in our what is an invoice? Q&A section.

Debit Note

Debit notes are accounting source documents prepared by the buyer to show that goods have been returned to the seller and to reflect the fact that, in the books of the buyer the seller’s account have been debited (the amount the buyer owes the seller has been reduced).

The debit note will usually show particulars of the goods returned, including the parties to the transaction, the date, quantity, reasons for the return, and amount.

The original debit note is sent to the seller, and a copy of the debit note is retained by the buyer to support the double entry bookkeeping transaction.

Credit Note

A credit note does the opposite of an invoice. If a seller sells goods to a buyer on account, and the buyer returns some of the goods to the seller, then the seller will issue a credit note. The credit note will typically show particulars of the goods returned, including the parties to the transaction, the date, quantity, and amount of credit.

The original credit note is sent to the buyer, and a copy of the credit note is retained by the seller to support the double entry bookkeeping transaction in the accounting records.

Statement

A statement is issued by a seller to a buyer. The statement will show details of all the invoices and credit notes issued by the seller, together with details of payments received from the buyer.

The purpose of the statement is to show the buyer details of the outstanding invoices they have with the seller, allowing the buyer to reconcile their accounts.

The original statement is sent to the buyer, and a copy of the statement is retained by the seller.

Remittance Advice

Remittance advices are accounting source documents sent by the buyer to the seller together with payment in respect of goods purchased on account from the seller. The remittance advice shows details of the seller’s invoices being paid, the amount and date.

The purpose of the remittance advice is to show the seller which of their invoices is being paid and how the payment should be allocated in their accounting records.

The original remittance advice is sent to the seller, and a copy of the remittance advice is retained by the buyer.

Check

A check or cheque is a written order to a bank authorizing the bank to pay an amount of money to the person named on the cheque. For example, a buyer of goods might issue a check to a seller to pay for the goods.

In this instance, the original check is sent to the seller, and the counterfoil in the check book is retained by the buyer to support the double entry bookkeeping transaction in the accounting records.

Receipt

Receipts are accounting source documents normally issued to acknowledge that money has been received by one party from another. The receipt will typically show particulars of the money received, including the parties to the transaction, the date, and the amount of money.

For example, is a seller makes a cash sale of goods to a buyer, then the seller will issue a receipt to the buyer to show that the cash has been received in payment for the goods.

The original cash receipt is sent to the buyer, and a copy of the cash receipt is retained by the seller to support the double entry bookkeeping transaction.

Paying-in slip

Paying in slips are accounting source documents used to deposit money into a bank account. The paying in slip shows details of the coins, notes and cheques deposited with the bank, the account details, and the date.

The original paying in slip is sent to the bank, and the counterfoil in the paying-in slip book is retained by the depositor to support the double entry bookkeeping transaction in the accounting records.

Payment Voucher

A payment voucher is an authorizing document for a payment. The voucher can be for any form of payment such as petty cash expenses, wages and salaries, or a payment on a vendors account in the accounts payable ledger.

The accounting source documents diagram used in this tutorial is available for download in PDF format by following the link below.

Accounting Source Documents January 24th, 2017Team

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