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Source of Documents and Their Functions

Source documents are the original records of financial transactions that provide key details like date, purpose, quantities, amounts, and parties involved. They serve important functions like record keeping, accounting, auditing, and legal documentation. Providing accurate and timely source documents to accountants assists with financial reporting and analysis of business activity. Quotations offer potential customers pricing and conditions for goods or services before purchase. Purchase orders authorize suppliers to provide specified goods or services by a certain date. They help both buyers and sellers document transactions for record keeping, auditing, and financial statements. Sales orders are generated by suppliers to deliver goods or services to customers based on received purchase orders. Goods received notes are prepared by customers to list items accepted from suppliers.

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Farhan Osman ahmed
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1K views

Source of Documents and Their Functions

Source documents are the original records of financial transactions that provide key details like date, purpose, quantities, amounts, and parties involved. They serve important functions like record keeping, accounting, auditing, and legal documentation. Providing accurate and timely source documents to accountants assists with financial reporting and analysis of business activity. Quotations offer potential customers pricing and conditions for goods or services before purchase. Purchase orders authorize suppliers to provide specified goods or services by a certain date. They help both buyers and sellers document transactions for record keeping, auditing, and financial statements. Sales orders are generated by suppliers to deliver goods or services to customers based on received purchase orders. Goods received notes are prepared by customers to list items accepted from suppliers.

Uploaded by

Farhan Osman ahmed
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Source Documents and Their Functions

When a business generates a financial transaction, it creates a paper


trail. This paper trail is called a “Source Document.
A source document is the original record of transaction.it states the
basic facts of the transaction such as its date, purpose (description of
transaction), quantity of the goods exchanged, amount of money
involved, name of the seller and buyer and so forth.
The source document is a good internal control and provides evidence
a transaction occurred. Providing source documents to your
bookkeeper or accountant in a timely manner assists them in
preparation of financial statements and accurately analyzing your
business activity.

Uses of source documents

For record purposes


For accounting purposes
For auditing purposes
For legal purposes
Quotations
What is a Quotation?
Defined: A document sent to a potential customer offering to sell goods
or services at a certain price, under specified conditions.
A quotation is used to let a potential customer know the cost of goods
or services before they decide to purchase them.
Quotations tend to be used when businesses do not have a standard
listing of prices for products.
For example when the time, materials and skills required for each job
vary according to the customer’s needs. Quotations can’t be changed
once they have been accepted by the customer.
*Purchase order*
A purchase order, or PO, is a legal document a buyer sends to a
supplier or vendor to authorize a purchase. Purchase orders outline
what the buyer would like to purchase and how much of it they would
like to receive.
*Importance*
These agreements help both the buyer and seller document their
transactions.
Purchase orders are beneficial for both the buyer and seller. By issuing
purchase orders, small businesses can specify what goods and services
they need from their suppliers and when they need them.
This keeps the small business’ operations efficient and organized. It also
allows the seller to ensure they can provide the goods and services
requested before committing to fulfillment, giving the buyer time to
plan accordingly.
Additionally, purchase orders can help the buyer and seller maintain
accurate, detailed records for auditing and financial statements.
Sale Order
Now, to make you less confused, let say you are in the suppliers and
you just received the order ( purchase order) from your customer.
Now you create the Sale Order for the warehouse or sales team to
deliver the goods or services to your customers.
So in theory, Sale order is a type of accounting documents of the
company that details an order placed by a customer for goods
or services.
The customer may have sent a purchase order to the company from
which the company will then generate a sales order.
Sales orders are usually sequentially numbered so that the company
can keep track of orders placed by customers. Make sure you are not
confusing with Purchased Orders.

Goods Received Note:

Now assume you are the customer and you just make an order of goods
for your company. The supplier now delivers the goods to your
warehouse and you are receiving them.

You are preparing the documents that list down the goods that you
receiving. These documents called Goods Received Noted.

In theory, Goods Received Noted is the type of document of the


company that lists the goods that a business has received from a
supplier.

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