Before knowing the steps on how to prepare a network sources document, it is essential to know, what type of document is it. Whenever a company makes any amount of financial transaction, a paper trail is generated. This paper trail is known as a Network Source Document. So, when a small business writes a check for office supplies then the source documents are known as the checks and the office supplies as the receipt.
Importance
The network sources document is essential for the accounting and bookkeeping purpose as it proves as an evidence that a financial transaction has taken place. Thus, when a company is audited, these Network Source Documents serve as a back-up for the accounting journals and a general ledger as indisputable audit trail.
When a company keeps the Network Source Documents, it resembles to the receipt of the taxes paid. Hence, whenever there is an audit, you can provide a proof that you have made the purchases. But in case of business, you need to keep the original documents for tax deductible expenses rather than receipts for every financial transaction occurred.
What Network Source Documents Provide
A source document provides all the important facts of the transaction like the amount, name of the client with whom transaction took place, the purpose for the transaction and lastly transaction date. Below are a few examples of common Network Source Documents: cancelled check, cash register receipt, credit memo in case of customer refund, invoice, computer-generated receipt (auto), deposit slip, and purchase order. The network sources document must be recorded in appropriate accounting journal without any delay. After this, they must be filed in a proper system for further reference if required.
Source Documents vs. Photocopies
In majority cases, photocopies of Network Source Documents are acceptable legally. But these must be legible, a true copy of the original describing the important facts, and within the limits of scanning. In situations where a materials receipt which specifies the items purchased and the price paid but scanned without the supplier’s name would not qualify in the criteria. Also, if a document presents all the information in its original receipt but was retyped in MS Word or MS Excel format would again not qualify the criteria.
Usually businesses follow a standard for the network sources documents and all such related documents where financial transactions matter. Not only businesses but government agencies also tend to follow the same standard these days. These must be legible, complete and an accurate copy of their original.
There might be situations when the Network Source Documents are not properly recorded. Thus, for that risk to be minimized, there are certain possibilities. One of them is to pre-number the documents to track the missing documents. Another one would be to reconcile the balances (match) in accounts to respective source documents to check if any of the transactions recorded in accounts by chance do not appear to have their supporting source documents. There are regulations which make it compulsory that few Network Source Documents must be retained for a number of years specified. But many business organizations keep them safe for reference even if there had been no law regarding the same to avoid any transaction related issue as evidence.
