Source document refers to original documents supporting financial transactions in the accounting system. In other words, journal entries/transactions are posted in the accounting system by looking at source documents. For instance, a sales invoice/dispatch note is a source document when going through the sales ledger. Similarly, the purchase invoice/receiving note is considered a source document when analyzing the purchase ledger.

Importance of source documents

The following aspects reflect the importance of source documents.

1. Reliability of the accounting record—Sorted and organized source document help ensure the reliability and credibility of the accounting record. When the source documents back each transaction in the accounting system, a higher sense of validation and authenticity is perceived.
2. Audit evidence or audit trail—Reviewing the source documents is the only way to track the audit trail and prove the legality of the transaction. For instance, you need legal entitlement deeds (source documents) to prove your ownership of a specific property.
3. Taxation and company compliance—A clean and sorted record of source documents is the prime requirement for taxation and corporate sectorial compliance. Any impaired documentation can attract financial penalties from regulators.
4. Bookkeeping and accounting—When doing bookkeeping/accounting, the accounting treatment, chart of account, account classification, account title, and other details are copied from source document. Hence, source documents need to be handled professionally.  

So, managing and storing source documents is the prime requirement of running and managing the business.

Examples of source documents

The following are some examples of the source documents.

• Sales invoice / Tax invoice
• Purchase invoice
• Dispatch notes
• Delivery note
• Loan agreement
• Title entitlement agreements
• Bank statement
• Receipt
• Deposit slip

Are source documents the same as accounting support?

Source document are used by the bookkeeper/accountant to post journal entries in the accounting system. The details of the transactions like like legal title, amount, description, and other details, are copied from the source document. Hence, the source document is an accounting document. However, the use of these documents is not limited to accounting and bookkeeping but also to other general uses like legal entitlement/ownership, defining terms and conditions, and other details.

What’s expected from the source document?

Following are the prime expectations from source documents.

1. Accurate– The source document is expected to be error-free and not misleading.
2. Reflecting transaction details– Reflecting facts & figures related to transactions under consideration.
3. Attributable– Participants of the deal/transactions should be identifiable.
4. Readable– Transaction details should be easily readable for understanding purposes.
5. Original– The details should be genuine and not misleading.

Conclusion

The source document is written evidence reflecting transaction details. In other words, the content/details of the transaction are copied from the source document.

These documents are considered essential aspects of business management as they are required to enhance accounting record reliability in terms of audit trail/evidence, taxation/sectorial compliance, bookkeeping, accounting purposes, etc.

Examples of these documents include sales invoices, purchase invoices, bank statements, receipts, delivery notes, dispatch notes, and deposit slips etc.

The expectations from these documents include accuracy, originality, readability, attributability, details reflection etc.