Source Documents of Accountancy

These documents are the first record regarding any detail of the business transactions. The source documents consistently report the date, time, amount, and nature of the transactions.

In simple words, from the source documents of accountancy, the transactions are recorded in the books of accounts. These documents of accountancy provide authentic proof of the recorded transactions.

The most commonly used source documents of accountancy are cash memos, debit notes, credit notes, invoices, bills, receipts, cheques, payslips, etc.

Books of Original Entry-Journal

A transaction first enters from a source document known as the ‘Books of Original Entry.’ In simple words, it’s a simple book where to record transactions in chronological sequence.

When the company is small, we can document every transaction in the journal, but this is no longer practicable as the company grows. A  journal has several sub-journals, which are known as special-purpose subsidiary books.

Subsidiary books can be categorised as follows:

• Cash Book
• Purchase Book
• Sales Book
• Purchase Return Book
• Sales Return Book
• Bills receivables books
• Journal Proper

Journal

A journal is an original entry book where we first document the transactions as they occur. Subsequently, the transactions in the journals transfer to the appropriate ledger accounts.

Advantages of a journal

•  A missed transaction entry is unlikely because we record transactions as they occur.
• Because transactions are in chronological order, it is simple to locate a transaction when needed.
• After analysing each transaction for debit and credit elements, the journal makes it easier to post to the ledger.
• Each journal entry includes narration that provides a summary of the transaction.
• The journal makes it easier to cross-check ledger accounts if the trial balance doesn’t match.
• It will be simple to post the transaction in a ledger once entered into the journal.

Limitations of Journal

•  When many transactions occur, it is impossible to record them all in a journal.
• When the transactions in a journal are repetitive, it requires repetitive posting labour.

Special Purpose Subsidiary Books

It is a special purpose subsidiary book when a book records similar business transactions. For example, a cashbook records all cash transactions, whereas another book records all credit purchase transactions, and so on.

In other words, subsidiary books are those in which we document transactions initially, and ledger accounts are created based on those transactions.

Cash Book

This book keeps track of all cash transactions, such as payments and receipts. Each cash transaction is in a separate book. It’s also helpful in keeping track of daily expenses, receipts, and the closing cash balance at the end of the day.

This book serves as both a subsidiary and an introductory book. When preparing a cash book, transactions are not entered into the journal. When transactions are recorded for the first time in a cash book, it is a book of original entries.

Purchase Book

This book records all purchases of products on credit. The term “goods” refers to the specific items or products the company sells. In other words, they are the items purchased to resell. Purchase books are sometimes known as invoice books or purchase day books.

Sales Book

The sales book records all credit sales. The products will be sold in cash and documented in the cash book rather than the sales book.

The sales book entries are according to the sales invoices that the firm sends to its customers.

The date, the customer’s name, the quantity, the gross amount allowed to the customer, and the net amount of sales are all included on the sales invoice.

Purchase Return Book

This book keeps track of returned goods acquired on credit. Return Outward Book is another name for it. A debit note is created and delivered to the supplier with the returned goods. 

Sales Return Book

This book tracks the returns of goods sold to clients on a credit basis. A credit note is created, and we must send the original copy to the entity that supplied the items.

Journal Proper

After the journal is subdivided into subsidiary books, the journal becomes a residuary book in which transactions not recorded in the other subsidiary books are present. The journal is the journal proper in this circumstance. The kinds of transactions recorded in the journal proper include opening, closing, adjustment, rectifying, transfer, etc.

Proper Ledger

The journal or special purpose subsidiary book records all business transactions. We must then transfer the entries to the appropriate ledger accounts. We should open each account in the ledger on its page or card.

Conclusion

A businessman is not required to maintain all the subsidiary books mentioned above. According to the size of the business, only needed books are helpful. All these books are known as books of original entry due to the transactions first recorded in these books.