Wednesday, 3 July 2013

Origin of Transactions Source Documents and Vouchers

A document which becomes the basis for recording a transaction in the books of account is called source document. These documents show the nature and amount of the transaction and named vouchers. Vouchers are the receipts, bills, cash memos, invoices, salaries bills, wages bills, travelling allowance bills, counterfoils of cheques, registration deeds, and any other form of written proof that the transaction has actually taken place and can be verified from the d9cuments. Whenever we sell goods, we prepare invoice for sending goods out of station, bills for credit sales, and cash memos for cash sales. The original copy is handed over or sent to the purchaser but the duplicate copy is kept as record in the business. These duplicate copies are the source documents for making record in our books of accounts. In the same way, while making purchase we receive original copy of invoices or bills or cash memos. These copies also work as source documents for recording purchase. Whenever we make payment we obtain receipt from the party receiving payment. While making payment of rent to landlord, a receipt for the rent is received. Workers and employees affix their signature on wages and salaries bills on receiving their wages and salaries. Insurance Company, Delhi Electric Supply Undertaking (DESU), Water Works issue receipts for having received the payment. Buses, railways and airlines issue tickets on receiving payments. We receive receipts even for petty and insignificant payment. These receipts are the source documents for accounting records. The first step in accounting is to identify the origin of the transaction which is undoubtedly based upon documentary evidence known as source documents.
  • Meaning
As we know Accounting deals in facts, which actually happen and can be verified by documentary evidence known as source documents.
It shows that source documents are real, visible, legible and meaningful records certifying the actual happening of the transactions of financial nature. In Accountancy, every journal entry must be supported by source documents popularly known as vouchers. Some important documents are discussed here with :
1. Cash Memo. It is a document indicating the amount, date and details of cash purchases and cash sales. We receive cash memo on cash purchases and issue cash memo on sales. On the basis of these cash memos, cash purchases, cash sales and cash payments are recorded in the books.
2. Invoices and Bills. These documents i.e., invoices and bills are used for credit purchases and credit sales. In case of credit sale of goods we issue invoices/bills, which indicate the date, amount and details of sale. We prepare three copies of invoice. The first copy is sent to the purchaser through post office or bank, the second copy is kept in the bundles, packets or cases of the goods, the third copy is retained with us. The third copy is used as source document for recording credit sale. In case of credit purchases of goods, we receive invoice or bills and record credit purchases on its basis.
3. Receipt. In case of receiving amount, we issue a receipt indicating the date and amount of payment, details of the payer and the purpose of payment. The counterfeit or the carbon copy of the receipt issued is used as source document for the receipt of the amount. In the same way, when we make the payment, we are issued receipts and record the payment in the books of Accounts.
4. Pay-in-Slip. In case of depositing cash and cheques in the Bank, we have to fill up Pay-in-Slip
(Deposit slip). The main body of the Pay-in-Slip is retained by the bank and the counterfeit duly signed and stamped is returned to the customer. The counterfoil is used as the source document for recording the deposits.
5. Cheques. We issue cheques against different payments. The counterfoil of the cheque or notes on the cheque book containing details of the payment is used for recording the payment or withdrawal for self. Cheques received are deposited into the bank through Pay-in-Slip, which is used as source document.
6. Debit Note. In case of the return of goods purchased on credit we issue Debit Note to the seller, meaning that the Sellers’ Account has been debited with the amount of purchases return. This debit note is used as source document for recording purchase return. A format of Debit Note is given as under :

7. Credit Note. In case of sales return by our customers we issue Credit Note to them, meaning that the Customers Account is credited with the amount of sales return. The Credit Note· is used as source document.
A format of Credit Note is given as under :

8. Miscellaneous. Correspondence, registration deeds, wages, salaries, water, electricity,  telephone bills, tickets, conveyance bills, counterfoils and receipts, etc. are also used as source documents.
  • Meaning
A voucher may be defined as a written document to be used in support of entry made in the books of accounts.
In the words of J.R. Batliboi, “A voucher may be defined as documentary evidence in support of an entry appearing in the books of accounts”.
According to Ronald A. Irish, “A voucher may be a receipt, an invoice, an agreement, written requisition slip or in short any suitable written evidence, which confirms a written transaction.”

  • Special Features of Vouchers
(i) Vouchers are documentary evidence.
(ii) Vouchers are written document.
 (iii) Vouchers support the entry appearing in the books of accounts.
(iv) Vouchers present full description of the transaction.
(v) Vouchers substantiate the accuracy of entries in the books of accounts.
  • Examples of Vouchers
(i) Cash Receipts. Various vouchers of cash receipts are counterfoils, carbon copies of receipts issued, carbon copies of contracts made, correspondence etc. 
(ii) Cash Payment. Various vouchers of cash payments are cash memos, wage sheets, salary register copies of contracts, correspondence etc. 
(iii) Purchases. Vouchers regarding purchases are invoices, copies of order sent, goods inward books, correspondence, etc.
 (iv) Sales. Copies of orders received, records of goods supplied, goods outward book, correspondence, etc. 
(v) Purchases Return. Goods outward book, letter of credit, correspondence, etc. Preparation of Vouchers :


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