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2. Apply double entry concept

2.3. Accounting source documents are prepared

Accounting Source Documents Are Prepared

Source documents are the original records that provide written or electronic evidence that a business transaction has taken place.
They are the first step in the accounting cycle and are used to record transactions accurately.

1. Meaning of Source Documents

A source document is a proof of a transaction.
It contains key details such as:

  • Date of transaction

  • Amount involved

  • Nature of transaction

  • Parties involved

  • Signatures / Authorization

These documents must be prepared, collected, and kept for accounting and auditing purposes.

2. Common Types of Accounting Source Documents

Below are the main source documents used in business and what they are used for.

1. Invoice

  • Issued when goods or services are sold on credit.

  • Seller prepares a sales invoice.

  • Buyer receives a purchase invoice.

2. Receipt

  • Proof that payment has been received.

  • Issued when cash or cheque is received.

3. Credit Note

  • Issued when goods are returned by the customer.

  • Reduces the amount owed by the customer.

4. Debit Note

  • Sent by the buyer when returning goods to the supplier.

  • Request to reduce the amount payable.

5. Delivery Note

  • Shows goods delivered to the buyer.

  • Signed as proof that goods were received.

6. Payment Voucher

  • Used to authorize payments, especially in organizations.

7. Cheque and Cheque Counterfoil

  • Cheque: document instructing the bank to pay.

  • Counterfoil: proof that a cheque was issued.

8. Bank Statement

  • Issued by the bank showing deposits, withdrawals, and balances.

9. Cash Register Tape / Till Roll

  • Shows cash sales made during the day.

10. Purchase Order

  • Sent to supplier requesting goods.

11. Goods Received Note (GRN)

  • Confirms goods received from suppliers.

3. How Source Documents Are Prepared

a) Filling in transaction details

Each document must capture:

  • Date

  • Name of supplier or customer

  • Description of goods/services

  • Quantity

  • Price

  • Total amount

b) Authorization

Source documents must be:

  • Signed

  • Stamped

  • Approved by relevant officers

c) Issuing and filing

  • Original copy is sent to the customer or supplier.

  • Duplicate copy is kept for records.

  • Documents are arranged and filed by date for easy retrieval.

d) Using electronic systems

Many source documents are now created using:

  • Accounting software

  • Point-of-sale (POS) systems

  • Enterprise resource planning (ERP) systems

These systems automatically store and organize source documents.

4. Purpose of Source Documents

Source documents are prepared to:

  • Provide evidence of transactions

  • Support entries in books of original entry

  • Help with audit trails

  • Prevent fraud

  • Enhance accuracy and accountability