what do you understand as book keeping and source document.
FULL EXPLANATION INCLUDING IMPORTANCE/BENEFIT/TYPES
IN AGRICULTURAL SCIENCE
Answers
Answer:
What is Bookkeeping?
Bookkeeping involves the recording, on a regular basis, of a company’s financial transactions. With proper bookkeeping, companies are able to track all information on its books to make key operating, investing, and financing decisions.
Bookkeepers are individuals who manage all financial data for companies. Without bookkeepers, companies would not be aware of their current financial position, as well as the transactions that occur within the company.
Importance of Bookkeeping
Proper bookkeeping gives companies a reliable measure of their performance. It also provides information to make general strategic decisions and a benchmark for its revenue and income goals. In short, once a business is up and running, spending extra time and money on maintaining proper records is critical.
What are Source Documents?
Every time a business is involved in a financial transaction, a paper trail is generated. This paper trail is referred to in accounting as source documents. Whether checks are written to be paid out, sales are made to generate receipts, billing invoices are sent by suppliers, or work hours are recorded on an employee’s timesheet – all the respective documents are source documents.
Importance of Source Documents
Source documents are, first and foremost, important to the bookkeeping and accounting process because they serve as physical evidence that a financial transaction actually occurred. Nowadays, these documents do not necessarily need to be a physical hard copy – they may be in a traceable electronic form.
In addition, source documents are also essential in the auditing process. When companies undergo an audit, the auditor’s access to a clear and accessible paper trail of all transactions enhances the overall legitimacy and independence of the audit. In order to reaffirm the accuracy of the company’s balances in individual accounts, auditors need full access to all the documents. Overall, to run a business more smoothly and enhance transparency, all its source documents should be kept and stored for future reference.
Common Types of Source Documents
In its simplest form, a source document generally contains the following information:
The date of the transaction
The total amount of the transaction
A description of the transaction
One or more authorizing signatures
The most common documents are:
Checks
Invoices
Receipts
Credit memos
Employee time cards
Deposit slips
Purchase orders
Explanation:
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