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Journal
Source Documents
Accounting identifies only those transactions and events which involve money. They should be of financial character. Accountant does so by sorting out various cash memos, invoices, bills, receipts and vouchers.
In the accounting process, the first step is the recording of transactions in the books of accounts. The origin of a transaction is derived from the source document.
Source documents are the evidences of business transactions which provide information about the nature of the transaction, the date, the amount and the parties involved in it. Transactions are recorded in the books of accounts when they actually take place and are duly supported by source documents.
The following are the most common source documents.
Cash Memo
When a trader sells goods for cash, he gives a cash memo and when he purchases goods for cash, he receives a cash memo. Details regarding the items, quantity, rate and the price are mentioned in the cash memo.
Invoice or Bill
When a trader sells goods on credit, he prepares a sale invoice. It contains full details relating to the amount, the terms of payment and the name and address of the seller and buyer. The original copy of the sale invoice is sent to the purchaser and its duplicate copy is kept for making records in the books of accounts.
Similarly, when a trader purchases goods on credit, he receives a credit bill from the supplier of goods.
Receipt
When a trader receives cash from a customer, he issues a receipt containing the date, the amount and the name of the customer. The original copy is handed over to the customer and the duplicate copy is kept for record. In the same way, whenever we make payment, we obtain a receipt from the party to whom we make payment.
Debit Note
A debit note is prepared by the buyer and it contains the date of the goods returned, name of the supplier, details of the goods returned and reasons for returning the goods. Each debit note is serially numbered. A duplicate copy or counter foil of the debit note is retained by the buyer. On the basis of debit note, the suppliers account is debited in the books.
Credit Note
A credit note is prepared by the seller and it contains the date on which goods are returned, name of the customer, details of the goods received back, amount of such goods and reasons for returning the goods. Each credit note is serially numbered. A duplicate copy of the credit note is retained for the record purpose. On the basis of credit note, the customer’s account is credited in the books.
Pay-in-slip
Pay-in-slip is a form available in banks and is used to deposit money into a bank account. Each pay-in-slip has a counterfoil which is returned to the depositor duly sealed and signed by the bank official. This source document relates to bank transactions. It gives details regarding date, account number, amount deposited (in cash or cheque) and name of the account holder.
Cheque
A cheque is a document in writing drawn upon a specified banker to pay a specified sum to the bearer or the person named in it and payable on demand. Each cheque book has a counterfoil in which the same details in the cheque are filled. The counterfoil remains with the account holder for his future reference. The counterfoil forms the source document for entries to be made in the books of accounts.
Vouchers
A voucher is a written document in support of a business transaction. Vouchers are prepared by an accountant and each voucher is counter signed by an authorised person of the organisation.
The vouchers are properly filed according to their serial numbers so that the auditors may easily vouch them and these may also serve as documentary evidence in future.
Bills receivable, bills payable, wage sheet/salaries pay acquaintance, correspondence etc., also serve as the source documents.
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