What is a source document?

A source document is the original record providing evidence that a business transaction occurred, including invoices, receipts, bank statements, contracts, and timesheets. For professional service firms, source documents support financial records and provide audit trail documentation.

Key characteristics

• Original transaction evidence

• Supports journal entries

• Required for audit trail

• Must be retained

• Various types for different transactions

• Foundation for bookkeeping

Why it matters for professional service firms

Source documents prove transactions occurred and support financial statements. Without source documents, deductions can be disallowed and records questioned. Professional service firms should capture and organize source documents systematically for all business transactions.

Real-world example

Brian's bookkeeping system required source documents for every entry: client payments supported by invoices and bank deposits, expenses supported by receipts or credit card statements, contractor payments supported by invoices and W-9s, and payroll supported by timesheets and pay stubs. When the IRS questioned the $12,000 deduction, the source documents proved legitimacy.