Source Documents in Accounting: Definition and Purpose

Lesson Transcript
Instructor: Rebekiah Hill

Rebekiah has taught college accounting and has a master's in both management and business.

A key aspect of proper accounting is maintaining record of expenses through Source Documents, paper or evidence of transaction occurrence. See the purpose of source documents through examples of well-kept records in accounting. Updated: 09/27/2021

What Are Source Documents?

Kate owns an antique shop. This morning she got a phone call from her accountant asking her to bring her the source documents she has for the month. 'Well, Mrs. Brown, I would be glad to, but I have no idea what source documents are,' Kate says.

'Oh, Kate,' Mrs. Brown says, 'I am so sorry I didn't explain. Source documents are pieces of paper that prove that a transaction occurred.'

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  • 0:05 What Are Source Documents?
  • 0:33 Examples of Source Documents
  • 1:45 Why Source Documents…
  • 2:55 Lesson Summary
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Examples of Source Documents

'Pieces of paper?' Kate asks. 'What kind of paper?'

'Well, Kate,' Mrs. Brown says, 'Source documents are anything that you get during the course of a transaction. It can be receipts from purchases and invoices from sales you made, whether they be sales on account or cash sales; invoices that show you made purchases on an account are also source documents; checks you wrote to pay bills; deposit slips that prove you put a certain amount of money in the bank; or copies of paid bills - they're all source documents.'

Kate looks down at the scattered papers that are all over the counter. She gathers them up and begins to flip through them, pulling a few sheets out. 'Okay,' she says, 'So I have receipts where I paid cash for merchandise that I bought last week. These are source documents, right?'

'Yes, they are,' Mrs. Brown says.

Kate pulls another few pieces of paper out of the stack. 'And, I have copies of the bills that I paid this month. Will these work as source documents?'

'As long as it shows proof of a financial transaction, then yes, it is a source document,' Mrs. Brown says.

'Well, now that I know what I am looking for, I can get you what you need!' Kate says.

Why Source Documents Are Important

'Okay,' Kate says to herself, 'I think that I have it all together. I want to hand-deliver these and find out why they are so important!'

Kate drives herself to Mrs. Brown's office armed with all the source documents she can find. She walks in and hands the items to Mrs. Brown.

'Thank you, Kate. That was pretty quick. I'm glad you brought these. I really need to get your books done.'

'I was wondering, Mrs. Brown, can you explain to me why these are so important?' Kate asks.

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