Source Documents

Source Documents

When a transaction takes place between two businesses there is one document that starts the process and allows us to put something the books into the books of original entry (day books).  This is the source document.  Once you know what the transaction was then the source document should be easy enough to figure out.   In an exam you will usually be told this.  The clue is always in the wording of the question!  Read the full question - carefully!!!

Many people get confused when we talk about credit sales or purchases.  Instead focus on each transaction being separate.  The first transaction is the purchase/sale of the goods and only later does the actual payment occur.  Treat every transaction separately and things should hopefully become much clearer.

Some of the key transactions are put together in a simple table here for you: -

Transaction	Source Document
Purchase of inventory on credit	Purchase Invoice
Sale of invoice on credit	Sales invoice
The return of purchased inventory to your supplier which were originally bought on credit	(Purchases) Credit Note (you can’t get cash back if you haven’t paid for it!)
The return of sold items to you from your customer which were originally bought on credit	(Sales) Credit Note
The payment for petrol by cash	Receipt
Money paid into the business bank account	Bank Paying in Slip
Cheque sent to pay a supplier	Cheque Counterfoil (the stub left in the book)
Direct Debit or Standing Order  payment for Utility bill	Bank Statement
Credit Transfer received from a credit customer	Bank Statement