CHAPTER 8
Various transactions are made in a business every day such as purchase
and sale of goods and services, receipt or payment of cash and so on. Each business transaction
should be supported by documentary evidence such as cash memo, cash receipt, invoice or bill,
debit and credit notes pay-in-slip, cheque etc. These business document are called source
documents.
Source Documents of Accountancy -These documents are the first record about the details of a
business transaction. Such documents report the date, the amount, parties involved and the nature
of the transaction. Entries in the books are always made from the source documents. According
to the verifiable objective principle of accounting, each transaction recorded in the books of
accounts should have adequate proof to support it. These documents are the written and authentic
proof of the correctness of the recorded transaction. These documents are required for audit and
tax assessments. They also serve as the legal evidence in case of a dispute. The following are the
most common source documents:
(i) Cash Memo- When a trader sells goods for cash, he gives a cash memo and he purchases goods for cash he
receives a cash memo. Details regarding the item, Quantity, rate and the total price is mentioned in the cash
memo. Cash transactions are recorded in the books of accounts A the books of accounts on the basis of these
cash memo.
.
(ii) Invoice and Bill - When a trader sells goods on credit, he prepares a sale invoice which contains the name
of the party to whom goods are sold, the rate, quantity and the total amount of sale. The original copy of the
sales invoice is sent to the purchaser and its duplicate copy is kept for making records in our books of
accounts. Similarly, when a trader purchases goods on credit, he receives a credit bill from the supplier of
goods. We make an invoice on credit sale but receive a bill on credit purchase, though the two terms
are used synonymously and mean the same thing. Specimen of an invoice or a bill is given below:
(iii) Receipt -When a trader receives cash from a customer, he issues a receipt containing the date, amount
and the name of the customer. The original copy of the receipt is given to the customer and its duplicate copy
is kept for making records in the books of accounts. In the same way, whenever we make payment we obtain a
receipt from the party to whom we make payment.
(iv) Debit Note- When we return goods to a supplier, we prepare a debit note and send it to the supplier with
the returned goods. Debit note is a document which indicates that supplier's account is being debited. It is a
source document which contains the date of transaction, the name of account which is debited, the amount
and the reasons for debit. A duplicate copy or the counterfoil of the 'debit note' is retained by us, on the `basis
of which, the supplier's account is debited in our books. A specimen of the debit note is
given below.
(v) Credit Note-When goods are received back from a customer a credit note is sent to him indicating that the
customer's account has been credited in our books. A duplicate copy of the credit note is retained for record
purpose.
(vi) Pay-in-Slip-This is a form available from a bank and is used to deposit money in the bank. Each pay-in-slip
has a counterfoil which is returned to the depositor duly stamped and signed by the cashier of the bank.
(vii) Cheque- A cheque is an order in writing drawn upon a bank to pay a specified sum to the bearer or the
person named in it. Each cheque book counterfoil in which the same details as entered in the cheque are
filled. The Counter foil remains with the account holder for future reference. Thus, there must be a source
document for each transaction recorded in the books of accounts.
Vouchers
Meaning of Voucher- On the basis of source documents entries are, first of all, recorded on
Vouchers and then on the basis of Vouchers recording is made in the Journal or books of original
entry. Vouchers are printed separately by all the firms in their own names. A separate Voucher is
prepared for each transaction and it specifies the accounts to be debited and credited. Vouchers
are prepared by an accountant and each Voucher is countersigned by an authorised person of the
firm.
A serial number is put on each Voucher and the relative source documents are attached with the
Voucher. The Vouchers are properly filed according to their serial numbers so that the auditors
may easily vouch them and these may also serve as documentary evidence in future.
Types of Vouchers
CASH VOUCHERS -Cash Vouchers are prepared for cash transactions i.e. cash receipts and cash payments.
These are of two types viz., Debit Vouchers and Credit Vouchers.
DEBIT VOUCHERS-These are prepared for transactions involving cash payments such as:
For Cash payment of expenses (say salaries, rent etc.)
For Cash purchases of goods
For Cash purchases of investments
For Cash purchases of fixed assets
For Cash payment to Creditors
For Depositing Cash into the Bank
In case the source document is not available for a transaction, the receipt portion of the debit voucher is filled
and is used as source document.
CREDIT VOUCHERS-These are prepared for transactions involving Cash receipts such as:
For Cash receipt of income (say Commission, Interest etc.)
For Cash sales of goods For Cash sales of investments
For Cash sales of fixed assets
For Cash receipt from debtors
For Withdrawing Cash from the Bank
NON-CASH VOUCHERS OR TRANSFER VOUCHERS: These Vouchers are prepared for
non-cash transactions such as:
For Credit Purchase or Credit Sale of goods
For Credit Purchase or Credit Sale of investments
For Credit Purchase or Credit Sale of fixed assets
For Return of goods purchased or sold on credit
. For Providing depreciation
Compound Voucher -A document showing a transaction that contains multiple debits and one
credit or which contains multiple credits and one debit is called compound voucher.
Thus a compound voucher may be of two types:
(a) Debit Voucher and
(b) Credit Voucher.
(a) Debit Voucher: A document showing a transaction that contains multiple debits and one
credit is called Debit voucher.
(b) Credit Voucher: A document showing a transaction that contains multiple credits and
one debit is called Credit voucher.
