- Created: Friday, 27 January 2012 06:13
- Published: Friday, 27 January 2012 06:13
- Written by Jeanine Pfeiffer
Are source documents a thing of the past? With the technology we have today, automated systems are such a part of our lives in every way and paperless systems are becoming the norm. So, do we really need to stop and understand how all the data is put into our financial records in the first place? Before we try to answer this question, we first must know what exactly source documents are and why they matter so much to a business owner.
Source documents come in many forms. They can be(1) Any paperwork coming from a vendor is considered accounts payable. This can be invoices for merchandise, telephone bills, business licenses, etc.(2.) Any documents that are for a sale to a customer. This includes cash sales, credit sales , or credit memos. Cash sales are considered sales receipts. Credit sales are called accounts receivable.(3.) Any paperwork coming for taxes is considered cash payment documents. These can be paperwork from the IRS, city for city taxes, sale tax & b&o taxes, etc.(4.) Any paperwork for business credit cards associated with business expenses. These are considered credit card payables.(5.) Any lines of credit or note payables from the bank. These are considered as short term or long term notes payable.(6.) Investments by investors. These are classified as capital investments.(7.) Any checks written out of the company checking account. This can be for a variety of expenses, or other payments, and will be the source document for any of the above accounts payable invoices. It could also simply be checks written out of the account for miscellaneous charges like a prepayment for rent. These documents are records to help business owners in case a customer's sales invoice got lost or there is a vendor charging you more than you owe for example. Understandably, the importance of these documents are high, so in the perspective of why they should matter so much to a business owner is the realization that they are not a thing of the past but a crucial link to the process of accounting to begin.