Define source document.

A source document is an original record that provides evidence of a transaction or event. It is used as a basis for recording the transaction in the accounting system and serves as a reference for future verification and auditing. Source documents can include invoices, receipts, purchase orders, contracts, bank statements, and other documents that support financial transactions.

Source Document

A source document is an original document that contains information used to record a transaction or support an accounting entry. It provides evidence of the occurrence of a business activity and serves as the basis for accounting records.

Key Features of a Source Document:

- Originality: It is an original document, not a copy.
- Content: It contains relevant information about a business transaction.
- Evidence: It provides proof of the transaction, such as an invoice, purchase order, or bank statement.
- Authorization: It may have signatures or approvals to authorize the transaction.

Types of Source Documents:

Source documents vary depending on the type of transaction. Common examples include:

- Sales invoices
- Purchase orders
- Receiving reports
- Bank statements
- Checks
- Contracts
- Employee time sheets

Importance of Source Documents:

- Accuracy and Reliability: Source documents provide reliable evidence of transactions, reducing the risk of errors.
- Audit Trail: They create an audit trail that allows auditors to trace transactions and verify their accuracy.
- Legal Compliance: Some source documents are legally required to be maintained for tax or financial reporting purposes.
- Management Control: They help managers track and monitor business activities, identify inefficiencies, and improve operations.