Source documents are the documents that act as an evidence of a business transaction. It is a document on the basis of which the accounts are debited or credited. The verification and the objectivity principle focus on the importance of source documents. There are various different types of source documents.
Commonly used source documents
Cash Memo is the document that is prepared at the time of selling of goods for cash. The details that are included in cash memo are serial number, date, quantity sold, price per quantity, discount allowed (if any) and the total amount received. Cash memo acts as an evidence for the cash sales of the business.
Invoice, commonly known as bill, is issued by the seller when the goods are sold on credit. Again like cash memo, invoice contains details of quantity of goods sold, price per quantity, other charges, total amount of goods etc. Usually the invoice is prepared in duplicate and as the original copy of invoice is given to the buyer and the duplicate copy is retained by the seller as it acts as an evidence for the goods sold on credit and the original invoice acts an evidence of credit purchases for the buyer.
The document of receipt is issued by the seller when the seller receives the cash from the customer. The original copy of the document is given to the customer and the duplicate is retained by the seller for future reference. The receipt contains information about the date of date of receipt, name of the party, nature of payment, concerned amount etc. The receipt is signed by the authorized signatory but can be prepared by the cashier or other concerned person. The receipt act as an evidence that the cash is received by the seller on the given date and the from the payer point of view receipt shows that the buyer has paid the cash on the given date.
Bank supplies cheques to the account holders which help the account holder to withdraw amount from their accounts or to direct the bank to transfer the given amount of money to the account of the party whose name is mentioned on the cheque. The details written on the cheque includes name of the bank, name of the party to whom the amount is to be transferred, amount payable (written in figures as well as in words) and most importantly the signature of the account holder.
Pay in slip
Pay in slip is used to deposit either cash or cheque by customer into their bank accounts. The pay in slip includes information about the bank account number, amount to be deposited, Name of the account holder, details of cheque( when cheque is deposited), Signature of depositor etc. The pay in slip has two portions where the first portion is pay in slip and the other one is counterfoil. The pay in slip is retained by the bank whereas the counterfoil is returned to the customer which acts as an evidence of deposition of cash/cheque by the account holder.
A debit note is a document prepared by the buyer and sent to the seller of goods stating that the account of the seller is debited in the books of the buyer with the given amount. The debit note is usually issued at the time of purchase return which results in the reduction of amount that the buyer owes to the seller. Just like other source documents debit note is also prepared in duplicate where the copy of debit note is retained by the buyer and the original is given to the seller.
A credit note is a document prepared by the seller of goods and sent to the buyer stating that the account of the buyer is credited in the books of the seller with the given amount. The credit note is usually issued at the time of sales return which results in the reduction of amount that the seller has to receive from the customer. Just like other source documents credit note is also prepared in duplicate where the copy of credit note is retained by the seller and the original is given to the buyer.
Thus, Source Documents are the written evidences that are used to record any business transaction as debiting and crediting of the account as a result of any business transaction is based on the source documents.