July 5, 2020

SB-Accounting

Accounting + Finance Blog

13 types of source documents in financial accounting

Earlier, we have defined source documents. Also, the importance of source documents was explained in detail in a previous post. In this lesson, the types of source documents will be analyzed. You should know that not all source documents are used in financial accounting. There are source documents used in cost accounting and public sector accounting as well. Here, the focus on financial accounting.

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Types of source documents

Below are the types of source documents you should know.

Sales Invoice: This is a source document used to acknowledge that sales have been made by a firm. In the traditional accounting books, the information in the source is recorded in the sales day book before being transferred to the sales account in the general election ledger and the personal account of the debtor.

Note that the sales invoice affirmed that credit sales have been made. However, if the source document is accompanied by a receipt, then it is not credit sales. More to this, in some small businesses, a sale invoice can serve two purposes. Either as credit sales or cash sales.

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Purchases invoice: This invoice is used to acknowledge that good was purchased by the organization. Purchases invoice behaves in a similar way as the sales invoice. However, when goods are purchased on credit terms, a purchase invoice is issued to the firm. Such an invoice is recorded in the purchases day book.

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At the end of the day, week or month, the amount is transferred to the purchased account in the general ledger and next to the personal account of the debtors.

Receipt Issued: When good is sold and payment is made immediately, a receipt is issued by the firm. Also, when customers who owe the business pays for such debts a receipt is issued. In any case, in a traditional accounting system, the cash book is debited with such amount.

Receipt received: This is used when the firm purchase goods and pay immediately for it. Or the payment of debts the firm owes its creditors. In any of these, receipts received by the firm. The data from such a receipt is credited to the cash book.

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Petty Cash Voucher: A petty cash voucher is a source document that serves as evidence of party cash transactions. The amount in this document is transferred to the party cash book.

Shares Certificate: Shares certificate is a document issued to an investor when he or she buys shares from a company. The certificate gives the holder the entitlement has a shareholder of that company.

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It is also evidence of the acquisition of shares. In such a case, debit the investment account and credit bank account.

Dividend Warrant: Dividend warrant is a document issued to a shareholder as proof that he will receive a particular amount of dividend. The shareholder will use the document to claim his or her dividend within the specified period of time.

Dividend warrants are no longer used in Nigeria. Instead, a eDividend or electronic Dividend is used. Each shareholder register for this through the company’s online portal. And as such the shareholder is easily credited to his or her bank account and received a notification for it.

Credit Note: A credit note is a source document used to correct an overcharge on the invoice given to oa r received by the firm.

Debit Note: This is a document used to correct an under change in either the sales invoice or the purchase invoice.

Credit note and debit note as source documents have similar behavior. They are recorded in the return inward and return outward daybook.

Pay-in-slip: Also called deposit slip is a document used to deposit money into a bank account. This serves as evidence that a transaction occurs in a bank and therefore the amount is debited to the cash book (bank column) as cash coming in.

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Cheque Counterfoil: This is a part of the cheques in a checkbook that is not cut out from the book. The counterfoil serves as evidence of the cheque to drawn. When a cheque is drawn, then the amount is credited to the cash book (bank column) as cash going out.

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POS Slip: This is the slip given after using a Point-Of-Sales machine to send, deposit or transfer money. The slip serves as evidence that a transaction has been made and as such recorded in the cash book on the appropriate sides.

Digital Vouchers or, Receipts: These are invoices, receipts, or vouchers sent through emails, a website, and a mobile application (fintech, accounting software) as evidence that a particular transaction occurred. When digital invoices are received, cash is either paid or received. This is given its proper treatment in the cash book.

Next, the invoice as a type of source documents will be discussed in detail.

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