What is a Source Document?
A source document is the original paper or digital record that proves a business transaction happened and provides the details needed to record it in the accounting system. Invoices, receipts, checks, and purchase orders are all common source documents. Without a source document, an accountant has no reliable evidence to justify a journal entry.
A source document is the original evidence of a transaction — such as an invoice, receipt, or check — that supports and justifies each entry made in the accounting records.
- 1↓Transaction occursA sale, purchase, or payment happens in the business.
- 2↓Source document createdAn invoice, receipt, or check captures the transaction details.
- 3↓Journal entry recordedThe bookkeeper records a debit/credit entry based on the document.
- 4↓Posted to the ledgerThe entry is transferred to the relevant general ledger accounts.
- 5Financial statements preparedLedger balances flow into the trial balance and financial statements.
Step-by-step worked examples
A company sells $800 of goods on credit. What source document is created, and what does it support?
The seller issues a sales invoice for $800 The invoice is the source document proving the sale occurred The bookkeeper uses it to debit Accounts Receivable $800 and credit Sales Revenue $800
An employee is reimbursed $150 for travel expenses. What source document backs this up?
The employee submits a receipt totaling $150 The receipt is the source document evidencing the expense The bookkeeper debits Travel Expense $150 and credits Cash $150
A company writes check #204 for $3,000 to pay rent. What is the source document?
The check stub/copy for check #204 ($3,000) is the source document It shows date, payee, and amount The bookkeeper debits Rent Expense $3,000 and credits Cash $3,000
Flashcards
Quick quiz
Q1.Which of these is a source document?
Q2.What is the main purpose of a source document?
Q3.Which document would support a cash payment for rent?
Q4.In the accounting cycle, source documents are used to create…
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Common mistakes
Source documents are optional if the bookkeeper trusts the transaction. — Correct: Source documents are required evidence — trust doesn't replace documentation for audits or controls.
A financial statement is a type of source document. — Correct: Financial statements are outputs of the accounting process, not original evidence.
Only paper receipts count as source documents. — Correct: Digital invoices, e-receipts, and electronic bank records are valid source documents too.
Source documents are only needed for large transactions. — Correct: Every transaction, regardless of size, should have a supporting source document.
FAQ
What is a source document in accounting?
It's the original record — like an invoice, receipt, or check — that proves a transaction happened and supports the journal entry.
What are examples of source documents?
Sales invoices, purchase orders, receipts, bank statements, and checks are all common examples.
Why are source documents important in accounting?
They provide the evidence needed to record accurate journal entries and support internal controls and audits.
How do source documents fit into the accounting cycle?
They are the starting point: a transaction creates a source document, which is then used to record a journal entry.