The source document is an original record and paper trail for each company start their bookkeeping process
The source document is an original record and paper trail for each company start their bookkeeping process. Each source document has a unique number and must record in the accounting system, in order to differentiate it and allows a company to investigate whether any documents are missing. Most of the source document are made in duplicate, the firm is kept a copy document and the original document is sent to the purchaser. Furthermore, if you classify all the original documents, you can get the sum of each transaction and finally form a set of financial statements. Usually, a document contains the details of each transaction is generated when conducting a business transaction. For example, the name of the parties involved, date, amounts paid, the purpose of the transaction, trade and cash discounts, the matter of the transaction. (https://www.accountingtools.com/articles/what-is-a-source-document.html, by Steven Bragg, November 07, 2017).
Documentation is important to any accounting system because source document is a transaction trail for doing journals and general ledger. Besides, it prepares for the financial statements and accurately analyzing your business transaction. Moreover, the document can proof that transaction recorded in the books of accounts has occurred. Source document should be retained as well for future reference because auditors will review a part of a company’s transactions and will need to inspect the related source documents. (https://bizfluent.com/about-6550087-documentation-important-accounting-information-systems-.html by Sheila Shanker, 26 September 2017)
There are 8 types of the source document and its function. First one is the invoice, it is a bill to record about credit transaction. It helps to remind buyer of the amount to be paid, related charges for late payment and amount of discount given. Second is the debit note, it uses for adding the amount of forget or additional charges after the invoice had been already sent out. If which of the party pay over to the supplier, they can use the debit note to inform supplier. In this document must writing down the right details and reason debiting account. Buyer can also send to their supplier when need allowance is given for unsatisfactory goods. Thirdly is payment voucher, sometimes it instead of cash in a transaction, to be a receipt or showing that an invoice has been approved for payment by cash or cheque. Fourthly is cheque counterfoil, it is a part of the cheque after tearing out the particular cheque and issuer need to keep as a receipt for evidence has made the payment to a named party. (http://www.yourarticlelibrary.com/accounting/documents/top-8-types-of-documents-used-in-accounting/63112 by Vidya Sethy, Top 8 Types of Documents Used in Accounting )Fifth is credit note, it is a certificate of return goods to the seller or corrects the amount overcharge in the invoice. It is using when invoice amount is overstated, correct discount rate, goods damage within guaranty period, goods do not same with buyer’s demand. Sixth is cash bill, this will using in the business transactions with the cash term and payment is made with immediately. Seventh is the official receipt, it is an evidence to prove that the amount owning was settled. Eight is the memo, it is recording within the office about the message or note, it writes with clear and brief. (Frank Wood’s Business Accounting,13edition by Frank Wood, 2015Year)