What are source documents?
Source documents are documents that reveal evidence of business transactions. They serve as proof that an economic event has occurred in a business. The source document is also an authority in the hands of the holder. With it, the holder can claim the right to a particular activity.
For example, cheques are evidence of transactions in the bank. If an individual came to withdraw money from a bank via cheque but on a later date claimed he didn't withdraw such money. The cheque will serve as evidence and authority to the bank that the money was paid to the individual.
Source documents do not serve only as evidence but also as an authority of economic activities.
-- Jeremiah
Lists and explanations of the types of source documents
The following are some types of source documents in use in Nigeria.
Invoice
Invoices are issued when goods are purchased. It is issued by the seller to the buyer as evidence of a sale of goods or a rendering of services. Invoices are mainly for credit sales or purchases.
Debit note
A debit note is issued to a customer by the seller to correct an undercharge. When goods are returned by a customer, a debit note is usually issued as evidence of such return. Generally, it is printed in red. Debit notes can also be used in other cases such as when the amount charged on the invoice is lower than the actual amount the buyer is expected to pay for the goods.
Credit note
On the other hand, credit notes are issued to correct an overcharge. It is also issued when goods are returned. However, if goods or services are overcharged by the sales representative, a credit note can be used to make such corrections.
Bank deposit slip
Bank deposit slips are used to deposit cash within a bank. The deposit slip of a particular bank is unique and cannot be used in other banks.
Receipt
Receipt on its part is utilized when a cash transaction occurs. It can be a cash sale or purchase or a payment for debts. Receipts are issued for rebates that are agreed on a cash basis.
Bank statement
Bank statements can also serve as evidence of transactions. This is true in cases where a payment has been made to a client or supplier but they claim they haven't received the money. The portion of the bank statement can be printed and sent as evidence of payment.
Cheque counterfoil
This is also another useful evidence for those who deal with cheques for their transactions. Although cheques are rarely used these days due to Internet banking, cheque counterfoils can be used to show transactions that were done via cheques.
5 importance of source documents
Serves as evidence
The main importance of source documents is that they serve as evidence of transactions. When a business transaction takes place, a source document is issued before the transaction is entered into a book of original entries.
Use as authority
A source document can serve as an authority to claim a subject matter. For example, a Certificate of Occupancy is an authority that the land belongs to the holder.
Auditors require them
For companies, source documents are needed during an audit. In carrying out an audit trail, auditors must examine this evidence to prove the true and fair view of the business's financial transactions.
Tax authorities need proof
Where tax authority comes for a tax audit or as a query against an entity, the organisation can use source documents to prove that they are not guilty.
Use in court cases
During court cases especially in areas of bankruptcy and other financial cases, source documents can be used to win or prove a case in the court of law.
