Hi Karen,
Additional notes on this are:
Proper maintenance of source documentation is a key and often overlooked factor to ensure proper and accurate transactions are posted to the Bookkeeping system.
Each time a company makes a financial transaction, a paper/online trail is generated. This trail is ‘source documents’. If a small Business processes payroll for its staff, for example, the source document is the payroll report with approved timecards.
Source documents contain the details that Bookkeepers need to post transactions correctly. Additionally, source documents are the evidence that a financial transaction occurred during a subsequent audit.
Good source documents should describe all the basic facts of the transaction such as the amount of the transaction, the parties involved, the purpose of the transaction, and the date of the transaction.
Good examples of common source documents include:
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'Paid' cheques /BACS/CARD payments on a bank statemnet
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Invoices
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Leases & contracts
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Credit notes for a customer refund
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Deposit slips
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Purchase orders
It is critical that a Business receives good financial information. Source documents are the foundation of this.
When a source document does not exist, for example, when a cash receipt is not provided by a Vendor, or is misplaced, a document should be generated, as soon as possible after the transaction, using other documents such as bank statements to support the information on the newly generated source document.
Once a transaction has been posted in the books of a Business the relevant source documents(s) should be filed and made retrievable so that transactions can be subsequently verified should the need arise at a later date.
Kind regards
Brian
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