What is a source document?

Definition

A source document is the paper or PDF that proves a posted amount. It is the file behind the number, not the number on the statements.

The file supports an asset, a liability, equity, revenue, or an expense. If you cannot produce it, the posted amount is only a claim.

Where it shows up

Balance Sheet: Related to the receivable, payable, or cash the document supports.

P&L: Related to the expense or revenue the document supports.

Cash flow: Related to nothing extra until a later payment or collection.

See also: Audit Trail · Journal Entry · Posting

When you look at the Balance Sheet, cash, accounts receivable, and accounts payable are the lines. The source document is the invoice, the vendor bill, or the bank statement that explains those balances.

The Income Statement shows revenue and expense. The same files sit behind those lines: a customer invoice for a sale, or a bakery bill for bread cost.

The Statement of Cash Flows does not create a new kind of file. Cash moves later, when you collect or pay, and that later check or deposit has its own support.

In the software, the file is usually attached to the bill or the invoice. In a paper shop, it lives in a folder labeled by vendor, customer, or month.

How it works

A source document arrives or is created when something happens. A bakery emails a bill, a cafe is invoiced, and the bank issues a period statement.

You keep the file as it was issued. You do not replace the original with a later summary and call the summary the source.

You post from that file. The date, the amount, the vendor or customer, and the account all come from what the document says.

You store it so a later reader can find it. The posted row should point back to a named file, a bill number, or a folder location.

If the bill is for goods, you may also keep the purchase order and the goods receipt. Those extra files support the same payable and do not replace the bill.

A three-way match is one way shops test the bill before they post it. The order, the receipt, and the vendor bill should agree on quantity and price.

Vendor identity files are source documents too. A signed Form W-9 supports who the payee is, and year-end Form 1099-NEC reporting needs that same support.

Edits need a new file or a clear mark on the old one. A $1,200 bill that becomes $1,250 should still show how the first number was supported.

If you lose the file, the books can still show the amount. What you lose is the proof.

A bank reconciliation uses the bank statement as the independent file for cash. The statement is the source, and the reconciling worksheet is not.

Example

Maya runs a florist with a small cafe in the front. The bakery sends a $1,200 bill for a month of bread.

She keeps that PDF with the payable. Accounts payable goes up $1,200, and bread expense goes up $1,200.

The Balance Sheet now shows $1,200 more owed. The Income Statement shows $1,200 more bread cost.

The Statement of Cash Flows does not move yet. Cash will move when she pays the bakery, and the paid check or ACH confirmation becomes another file.

A month later a reviewer asks why bread is $1,200. Maya opens the bakery bill, not a memory of the week.

If the bakery later sends a credit for $50, she keeps that credit file too. The original $1,200 bill stays, and the credit is its own document.

Common mix-ups

The source document is not the journal entry. The journal is the dated debit and credit posted to the accounts.

The document is what those debits and credits rest on. You need both the posting and the file.

The source document is not the audit trail. The log names who posted, changed, or approved the event, and when.

The bakery PDF is the support. The log is the path of the booking.

The source document is not a supporting schedule. A schedule is a worksheet that adds up many lines for one statement total.

The bill is one original file. The schedule is a later summary.

A photo of a receipt can be a source document if it is complete and readable. A typed note that restates the receipt is not the original.

Related terms

• Audit Trail: The traceable chain from a reported number back to its source document.
• Journal Entry: A dated record of debits and credits posted to the ledger.
• Vendor Bill: The invoice a supplier sends that becomes a payable.
• Invoice: The document that bills a customer and creates a receivable.
• Bank Statement: The bank's period record of every transaction and the ending balance.
• Posting: Recording a journal entry into the general ledger accounts.
• Supporting Schedule: A detailed worksheet backing up a single line on the financial statements.
• Internal Controls: The procedures that keep the books accurate and assets protected.