What is a source document in accounting?

A source document in accounting refers specifically to the first record of a business transaction. This document serves as the original evidence that a transaction has occurred and includes details such as the date, amount, and nature of the transaction. Source documents can take various forms, including invoices, receipts, bank statements, and contracts. They are crucial for the accuracy of financial reporting and are used as the basis for recording entries in the accounting systems.

In accounting, the role of source documents cannot be overstated, as they ensure that all transactions are documented properly and can be verified if needed, which helps maintain the integrity of the financial records. This foundation supports all subsequent financial statements and reports, making accurate record-keeping essential for a comprehensive understanding of a business’s financial health.