Source Document
A source document is the original record that provides evidence a financial transaction occurred. These are the paper trail of your business — invoices, receipts, bank statements, contracts, purchase orders, and canceled checks. Source documents are the foundation of every bookkeeping entry and the
Source Document Definition
A source document is the original record that provides evidence a financial transaction occurred. These are the paper trail of your business — invoices, receipts, bank statements, contracts, purchase orders, and canceled checks. Source documents are the foundation of every bookkeeping entry and the backup you need if the IRS comes knocking.
Source Document in Practice — Example
A plumbing company completes a $1,500 job. The source documents for this transaction include: the signed service agreement (what was agreed), the materials receipt from the supply house ($340 in parts), the technician's time sheet (4 hours of labor), and the invoice sent to the customer ($1,500). Each document supports a different aspect of the transaction and together they create a complete, verifiable record.
Why Source Document Matters for Your Books
Source documents are the starting point for every journal entry. Without them, your books are based on guesses and memory — neither of which holds up during an audit. Every transaction in your accounting software should be traceable back to a source document.
For tax deductions, source documents are your proof. The IRS requires "adequate records" to substantiate deductions. A bank statement shows you spent $500 at Office Depot, but only the receipt proves what you bought and that it was a business expense.
Document retention is also a legal and practical requirement. The IRS recommends keeping most records for 3-7 years. Lost source documents can mean lost deductions, unresolvable discrepancies, or compliance violations.
How Source Document Shows Up in QuickBooks
In QuickBooks Online, you can attach source documents directly to transactions. When entering an expense, invoice, or journal entry, click the attachment icon and upload a photo or PDF of the receipt, invoice, or contract. QBO stores these digitally alongside the transaction. Use the receipt capture feature on the mobile app to photograph and auto-extract receipt data. This creates a digital source document library tied to your books.
Common Mistakes
FAQ
Q: What counts as a source document? A: Invoices, receipts, bank statements, canceled checks, contracts, purchase orders, shipping documents, time sheets, and any other original record of a transaction. Digital versions (photos, scans, PDFs) are accepted by the IRS.
Q: How long should I keep source documents? A: The IRS says 3 years from the filing date for most records, 7 years if you claim a loss from bad debt or worthless securities, and indefinitely for property records. When in doubt, keep it 7 years.
Related Terms
> Need help making sense of your books? Ketchup cleans up your QuickBooks in 3–7 business days. Get your price →
Related Terms
Direct costs are expenses that can be specifically traced to a particular product, service, project, or customer. They vary directly with production volume or activity level — more sales means proportionally more direct costs. Common direct costs include raw materials, direct labor, and subcontracto
Float is the time gap between when a payment is initiated and when the funds actually settle in the recipient's account. During this window, the money exists in limbo—it's left the sender's account (or is pending) but hasn't arrived at its destination. Float can work for or against you depending on
A draw (or owner's draw) is money or assets that a business owner takes out of the company for personal use. It's not a salary or expense — it's a distribution of equity that reduces the owner's stake in the business. Draws are common in sole proprietorships, partnerships, and LLCs where owners aren
A sub-ledger (or subsidiary ledger) is a detailed record that breaks down the transactions within a single general ledger account. Instead of showing one lump sum for "accounts receivable," the sub-ledger lists every customer who owes you money and how much each one owes. Common sub-ledgers include
Need these terms applied to your books?
Accounting Ketchup catches up your QuickBooks so the glossary becomes your reality. Flat rate.