Source Documents In Accounting

You can remember from previous sections that all business transactions must be recorded only if they are supported by certain source documents and those are those documents that are a lot of types and they serve as a basis to record transaction in the accounting records so let’s cover our main source documents and main types of them.  One is quotation this is written off also from the customer to the producer or supplier to deliver certain amount of goods or to provide services.

Of course quotation does not prove that it does not prove that the transaction occurred.  However, if during the later period of time goods were sold of services were provided quotation goes together with the other documents like invoices or purchase orders in order to support the transaction another one is sales order and this is a written document from customer to their supplier in order to acquire certain goods or services so here on the basis of this document customer I want as goods on services from the supplier.

Good receipt note it is a list of goods which were received by the customer from the supplier and this document proves that customer received goods and it serves as a basis for the supplier to require payment from the customer since it proves that customer received goods are supplied but just harder it goes from the purchaser to the supplier so this is similar like sales order but it is from the other side.  And here as a purchaser we show what quantity and what particular quality of goods we want to order purchase and what kind of services we would like to get.

Goods dispatch note it goes, this document goes together with goods which are sent to the customer to the client and they list all the details about the cargo.  I am not sure if they transport it to the customer.  So it is approved what kind of goods where supply then transport it.  Debit note.  This document is sent by a customer to a supplier in order to decrease the payment and such debit note might be related to return of goods or to claim to reduce the payment due to that quality of goods or due to other reasons.

And based on the debit note the supply is required to issue credit notes so it is document based on which the payment from the customer is decreased and the customer is allowed to pay less for the goods acquired and number one is receipt and this is a confirmation written confirmation of course since all the source documents are written documents that money has been paid and usually it goes from cash register so it is proof that money or cash was paid.

And remittance advice it is a document which is sent with the payment and it shows all the details basically invoice is in accordance to which the payment was made.  This document is quite important since if we get only total and one amount.  We can see this document what exact invoices were paid and what other remaining invoices went out paid and for what inventories we follow or what invoices we can claim payment later on.

And one of the most important source documents is invoice and invoice it relates to the sales or purchase order so basically it must show the same information as sale of a purchase order but it proves that transaction happened.  So it supports sales from the supplier to the customer and for a customer it is suppose the acquisition of the goods or services and also it is a request to pay money.  So if customer gets invoice from supplier this is a request from the supplier to pay money for the goods sold or services provided so these are the main features of the invoice and this is the main and one of the most important source documents from the accounting point of view.

Since invoice proves that transaction happened and it can be recorded in the accounting record and we can look into how invoice looks like and how it supports selling or purchasing of goods so if we sell goods we issue invoice and we match that invoice to the sales order details and sales order was received from the customer so we know what exact goods were ordered or what exact services were ordered and therefore we include those detail from them sales invoice and we provide services or sell goods to the customer and this invoice this is a request from customer to pay for the goods or services provided so the customer is liable to pay the supply cash based on that invoice.

On the other hand it can be from the perspective for the buyer if we buy goods we get invoice, which is they should buy the supplier and here that invoice must match purchase order so the order which we have provided to the supplier where we indicated what kind of goods we have ordered and we are able to check whether the data on the of the invoice is correct and whether it matches the purchase and also we can check whether we have received all of the goods we have ordered and this is the right form the supplier to claim payment from us so this is a document based on which we will have to pay for the goods acquired.

So this was a flow of the invoices from the perspective of the seller and the purchase and what kind of data should be included on the invoice.  Of course this is not the final or comprehensive list but these are the main items which must be included on the invoice and for accounting purposes or for legal purposes and other data might also be included on the invoice.  So first of all the invoices are numbered this is necessary in order to track them so in order to check in accordance which invoices customer speed for goods and in order to track whether the invoices reach the customer and in order to record the sales and be able to come back and track those sales.  We need to number invoices.

We have to include name, address of the seller and purchases of so these are parties of transaction so who will be obliged to pay for the goods or services and who will be able to claim the payment, date of sale this is the date of the transaction and based on that we recalled it description and it is detail from the goods or services quantity price quality description of the goods or services provided.  As mentioned quantity and unit price of each item unit price is required again from the accounting purposes so we will be using that price to your account how many items were sold or purchased and what was the cost of sales price and also we provide any details on the discount to see if such were provided and total amount of the invoice or sales tax if it was applicable and that total amount was sales tax will be adept from the customer to the suppliers or total payable amount.

And also as I mentioned we can include a lot of other data and usually the payment terms included so the period will then which – should be paid and also terms of sale.  So these are invoice details and afterwards there is a credit note it was mentioned already and here in more details it is document written document which sent by the supplier to the customer and which allows to decrease the depth from customer and basically these are returned goods or over payment for previous transactions or that quality of goods and decrease in price and similar reasons.

And we can see an example here how credit note is issued and how it is done so it is basically we call it credit note but it is negative invoice so it is negative amount included and we have credit note with regard to the return goods so first of all one company was selling goods to the another company and there was an invoice issued and goods were tables 20 units and unit prices indicated and due to amount payable from the customer to the seller so what happens next.

Next the customer return goods to the seller so company Y returns to company X and the seller and two tables are returned.  It might happen due to quality or due to different type of goods over that and due to other reasons why those tables were not suitable and its turn company X must issue to the customer credit not.  This is a negative invoice and it should show on the negative invoice the quantity of return goods with minus that it decreases the total quantity of the goods sold unit price and total amount by which the debt from the customer will be decreased so here it is minus 60.

Unit price is 30.  The units and the total price is, total amount payable will be decreased by $60 so the purchaser will be allowed to pay less since two tables were returned so this was the example of the credit note and please remember that those source documents again this surface basis is to record transactions and based on those documents we are able to track accounting records and to understand what exact transaction occurred and why it was recorded in the books and the way it was recorded.

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