Source Documents
Receipts, invoices, and evidence — the proof that transactions actually happened.
Why This Matters
Every journal entry you write is backed by a question: "Prove it. How do you know this transaction happened?"
Source documents are the answer. They're the physical evidence—receipts, invoices, checks, contracts—that prove a transaction actually occurred and deserves to be recorded.
Without source documents, accounting is just fiction. With them, it's a verifiable record that can withstand a tax audit, a legal dispute, or an investor's skepticism.
What Are Source Documents?
Source documents are the original records that provide evidence of a business transaction.
They answer the fundamental questions:
Which customer? Which supplier?
What was sold? What was purchased?
What date did this happen?
What amount?
For what business purpose?
For Sales
- • Sales receipt or cash register tape
- • Invoice (bill sent to customer)
- • Sales order
- • Delivery confirmation
For Purchases
- • Purchase receipt
- • Invoice (bill from supplier)
- • Purchase order
- • Packing slip
For Payments
- • Check stub
- • Credit card statement
- • Bank statement
- • Receipt of payment
For Employees
- • Time card
- • Payroll register
- • Wage calculation sheet
The Flow: Source Document to Journal Entry
Document Journey
Transaction Happens
Business activity occurs
Source Doc Created
Receipt, invoice, etc.
Accountant Reviews
Checks legitimacy
Journal Entry Recorded
References the document
Posted to Ledger
Balances update
Document Filed
Stored for audit
Example: A Cash Sale
Step 1-2: Customer buys coffee, register produces receipt:
Step 3-4: Accountant records the journal entry:
| Account | Debit | Credit |
|---|---|---|
| Cash | $9.18 | |
| Sales Revenue | $9.18 |
Notice: The entry references the source document (Receipt #00145)
Real-World Example: Purchasing Office Supplies
Let's trace a purchase from source documents to journal entry.
1. Purchase Order (You Send)
2. Invoice (Supplier Sends)
3. Delivery Confirmation
Accountant Checks:
| Account Name | Debit | Credit |
|---|---|---|
| Supplies Expense | $500 | |
| Accounts Payable | $500 |
All three documents (PO, invoice, delivery confirmation) are filed together as proof the transaction is legitimate.
Types of Source Documents
Sales Documents
Cash Sales Receipt
Proves you sold something for cash
Invoice (Sales)
Bill sent to customer for credit sales
Delivery Note
Proves goods were delivered to customer
Purchase Documents
Invoice (Purchase)
Bill received from supplier
Purchase Order
Document YOU send to authorize purchase
Receiving Report
Confirms items received match order
Payment Documents
Check
Written proof you paid someone
Credit Card Statement
Monthly summary of purchases
Bank Statement
All deposits and withdrawals
Employee Documents
Time Card / Timesheet
Records hours worked
Payroll Register
Summary of all payroll for period
Why Source Documents Matter
Reason #1: Proof of Legitimacy
Without source documents, anyone could write a journal entry for any amount. Source documents prove the transaction actually happened.
Reason #2: Prevents Fraud
If someone tries to record a fake transaction, they need a fake document. With proper controls, that's much harder to do.
Reason #3: Tax Compliance
The IRS requires source documents to back up deductions. No receipt? The IRS can disallow the deduction.
Reason #4: Dispute Resolution
If a customer says they were overcharged or a supplier claims they weren't paid, you have proof of what happened.
Reason #5: Audit Trail
Source documents show who authorized, executed, recorded, and what evidence supports every transaction.
Best Practices for Managing Source Documents
Before a purchase is made, it must be authorized (purchase order, manager signature).
For any major purchase, match three documents before paying:
If all three match, it's safe to pay.
Store documents so you can find them later:
Modern businesses scan or photograph receipts and store them digitally:
- • Takes up less space
- • Easier to search
- • Harder to lose
- • QuickBooks, Expensify digitize receipts automatically
Common Source Document Mistakes
Mistake #1: Recording Without Source Documents
Mistake #2: Losing Source Documents
Mistake #3: Not Matching Documents
Mistake #4: Recording Without Authorization
Key Takeaway
Source documents are the proof that accounting entries are legitimate. Every journal entry should be backed by a source document, and those documents should be organized, filed, and kept for the required time period. Without source documents, accounting is just numbers. With them, it's a verified record.
Test Your Understanding
1. Which of the following is NOT a source document?
2. You receive an invoice from a supplier for $2,000. What should you do BEFORE recording a journal entry?
3. Which source document is sent TO a supplier (not received FROM them)?
4. How long should you keep source documents for tax purposes?
5. True or False: You can record a journal entry without a source document if you 'remember' the transaction.
Ready to Practice?
You now understand why source documents matter and how they support journal entries. The Practice Lab is where you'll use them—analyze documents and record entries.