Source Document and Voucher - Let’s Discuss It
This is a high school topic to study about source documents and vouchers. Rarely do students take note of these minor topics but it is a highlighting topic of commerce. Source Documents and Vouchers play a major role in the daily transactions of a business, hence students are advised to study these minor topics thoroughly as well. Our main discussion will be – the difference between Source Document and Voucher. Related topics will also be discussed as - What is Source Document? Difference between bill and voucher and so forth.
Difference Between Source Document and Voucher In Brief
As said earlier, our main discussion will be based on the difference between source document and voucher. So, source documents are the particular ‘evidence’ that is present for a business to show its transactions. While vouchers are the documents that are required to pay off the liabilities of the business.
We will further discuss the difference between source documents and vouchers intimately. But, before this, let us clear our concept on these two terms – Source Document and Voucher.
What Is Source Document?
A source document is known as the original document which specifically contains every detail of a business transaction. A source document work is to capture the key information performed in a transaction, like the names of the parties involved in the transaction, amounts paid (if being paid), the date of transaction, and the substance or the main matter of the transaction. Source documents are frequently being identified with a unique number, which traces back to the aligned transactions. This is done so that they can be differentiated in the accounting system and accounting process. The documents are pre-numbered to allow the company in the process of the investigation if any documents go missing.
Getting Indexed
Once all the information in a source document is been recorded in the accounting system, the source document gets indexed for easy access and for processing the archives. The documents that are generated within the previous year are generally stored on-site, and the older documents are being stored in a lesser expensive off-site storage system.
Evidential Support
The source document provides a piece of evidence that the transaction has occurred. Source Document provides direct source information to the bookkeeper or accountant in a timely manner that is authentic, this will assist them in preparing the financial statements and accurately analyzing the business activity in the business concern.
Indeed, Is An Original Document
The source document is being referred to as the original document which contains the details of a business transaction. This will contain the most important details of the transaction like the amount which is being paid, and the parties involved in the transaction.
How Crucial To The Auditors? Examples Of Source Documents
Source documents are very crucial to the auditors, who use them as part of the evidence that confirms that the recorded transactions did actually occur. A source document is also used by the companies as legit proof while dealing with their business partners while paying them. Examples of source documents are:
Canceled Checks
Credit Memo
Deposit slip
Expense report
Invoice
Materials requisition form
Purchase Order
Time Card
Sales receipt
Thus, for evidentiary purposes, the electronic images of the source documents are generally acceptable, though paper-based documentation will still be required in some of these cases.
Voucher
A voucher is any written documentation that supports the entries that are reported in the account books, this indicates the transaction's accounting accuracy, which can be referred to as a voucher. Take, for example, a bill, receipt, salary and wages sheet, pay-in-slip counterfoil, checkbook counterfoil, invoice, or trust deed.
Vouchers are Source Documents
Vouchers are the source documents that serve as evidence of the business transaction which is retained for being used in cases where the auditors need to verify the business transaction made.
Who Uses Vouchers?
A voucher is a document that is used by a company's accounts payable department in order to gather and file all of the supporting documents which are required to approve the payment of any liability. A voucher is necessary for the backup document for accounts that are payable.
Redeemable Form of Transaction Bond
A voucher is defined as a redeemable form of transaction bond which values a particular monetary value. Vouchers can only be used on any specific grounds or for any specific goods. Examples of the same include vouchers for lodging, transportation, and food charges.
Components of Voucher
The components of the vouchers are as follows:
The supplier identification number.
The amount is to be payable.
The payment dates.
The accounts that are payable record the liability made.
Any other valid early payment discount terms.
The approval signature or the stamp.
Types of Vouchers
These are the different types of vouchers in an accounting system. These are as follows:
Debit or the Payment voucher.
Credit or the Receipt voucher.
Supporting voucher.
Non-Cash or the Transfer voucher (also known as Journal voucher).
Source Document Vs Voucher
Source Document and Vouchers in respect of their function, are quite similar. Let us check some of the points of difference that arise between the two.
Point of Difference | Source Document | Voucher |
Definition | Source Document is the document that contains the specific details of a business transaction. | Vouchers are the type of source document which acts as evidential proof that the business transaction happened between two or more parties. |
Purpose or Function | Source Documents are prepared for making accounting vouchers. | Used by the audit team for verifying the business transactions. |
Examples | The source documents include: Invoices Receipts Cash Memo | Examples of vouchers being: Credit Debit Note Credit Note |
Difference Between Bills and Vouchers
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Bills and vouchers both are terms that are predominantly used in any business transaction. The term voucher is also used in many other contexts which may create confusion about the same. However, these both are related to the products and the same prices.
Simply said, a bill is a statement that represents money to be paid item-wise. This is owed for the products that are being sold or for the services which are provided from the seller to the buyer. While a voucher can also be described as the written instruction that is used to confirm the goods and services for the specified amount of money.
FAQs on Difference Between Source Document and Voucher
1. What is the primary difference between a source document and a voucher in accounting?
The primary difference is their origin and purpose. A source document is the original, first-hand evidence that a transaction has occurred (e.g., a bill from a supplier). A voucher is an internal accounting document prepared based on the source document. It provides instructions on which accounts to debit and credit and authorises the entry in the books of accounts.
2. Can you provide some common examples of source documents and vouchers used in a business?
Certainly. Common examples include:
- Source Documents: Cash Memos, Invoices or Bills, Receipts, Pay-in Slips, and Cheque Counterfoils.
- Vouchers: Debit Vouchers (for payments), Credit Vouchers (for incomes), and Journal Vouchers (for non-cash transactions like depreciation).
3. If a source document like a cash memo already exists, why is it necessary to prepare a separate voucher?
Even with an existing source document, a separate voucher is crucial for internal control and accounting accuracy. A voucher serves three main purposes that a source document does not:
- Authorisation: A voucher is formally approved by a manager, which confirms the transaction's legitimacy before it's recorded.
- Accounting Direction: It clearly specifies the accounts to be debited and credited, preventing errors in journal entries. A cash memo only shows the transaction details, not the accounting treatment.
- Standardisation: Vouchers ensure all transactions are recorded in a consistent format, making the books easier to manage and audit.
4. What is a source document and what is its main purpose in the accounting process?
A source document is the original written evidence proving that a financial transaction took place. Its main purpose is to serve as objective proof of the transaction's details, such as the date, amount, parties involved, and the nature of the exchange. It forms the foundation for all accounting entries, ensuring they are verifiable and can be audited.
5. How does a source document lead to the creation of a voucher?
The process follows a clear workflow. First, a transaction occurs, generating a source document (e.g., you receive an electricity bill). The accounts department then verifies this document for authenticity. Based on the verified bill, an accountant prepares an accounting voucher, which details the journal entry (e.g., debit Electricity Expenses, credit Bank Account). After approval, this voucher is used to officially record the transaction.
6. How is a voucher different from an invoice?
An invoice is a type of source document. It is a commercial instrument issued by a seller to a buyer, requesting payment. A voucher is an internal document prepared by the buyer's company to authorise the payment of that invoice and direct how it should be recorded in its own books. In essence, an invoice is an external request for payment, while a voucher is an internal document to process that payment.
7. What are the consequences for a business if a transaction is recorded without a proper source document?
Recording a transaction without a supporting source document can have serious negative consequences, including:
- Lack of Verifiability: The transaction cannot be proven during an audit, making it appear questionable or fraudulent.
- Inaccurate Financials: Without proof, there's a higher risk of errors in amounts or details, compromising the reliability of financial statements.
- Tax Issues: Tax authorities require source documents to validate expenses. Without them, a business may face penalties or have its expense claims disallowed.
- Internal Control Failure: It creates opportunities for unauthorised or fraudulent transactions to be entered into the system.
8. What is the relationship between a 'voucher' and the process of 'vouching'?
A voucher is the documentary evidence that supports a single accounting entry. Vouching is the auditing process of examining these vouchers to check the authenticity, accuracy, and validity of transactions recorded in the books of accounts. In simple terms, a voucher is the evidence, and vouching is the act of checking that evidence.
