Top 35 Source Documents in Accounting

Various types of source documents in accounting

Introduction

Top 35 Source Documents in Accounting are the first source of information from which the accounting books are prepared. A source document is the document in which data for a transaction is collected. In addition, this supporting document will be used when recording journal entries for transactions. Also, it is a document that serves as the proof or source of the transaction.  

Top 35 Source Documents in Accounting are stated below:

1.Purchased order

These are sent by the buyer to the vendor. They will then outline exactly what the order should contain and when it should arrive.


2. Sales Invoice

This is made for account receivables. When an item is sold the seller will issue a document providing all the details of the sale.

3. Purchase Invoice

This is made for account payables. What the seller enters as sales invoice, the buyer will enter it as purchase invoice.

4. Debit Note

This is evidence of reduce in purchases. In customer books, debit note reduces how much they owe to the seller. This support purchases return journal.

5. Credit Note

This is evidence of reduce in sales. In supplier’s books, credit note reduces the amount owed by the customer. This support sales return journal.

6. Cheque

This is a special bank note that represents the cash being paid by the customer.

7. Revenue receipt

This is used to record the receipt of cash. A receipt is proof that the payment has been made.

8. Cash register receipts

This is a business paper that lists the money coming in from customers.

9. Bank advice

They are debit or credit bank advice. Bank credit advice is bank documents informing the business of an increase made in the business’s bank account. Bank debit advice is opposite of bank credit advice.

10. Deposit slips

When one receives cheque or cash from customer, the seller will take it to the bank and presented.

11. ATM cards

Received from the ATM machine as evidence that money was taken from the business bank account.

12. Bank statements

This is a summary of financial transactions that occurred at a certain institution during a specific time period. For example, a typical bank statement may show your deposits and withdrawals for a certain month.

13. Bill of exchange

This is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer.

14. Payroll report

This can also refer to the list of employees of a business and the amount of compensation due to each of them.


15. Cancelled Cheque

This is a check that has been paid or cleared by the bank it was drawn on after it has been deposited or cashed. The check is “canceled” after it’s been used or paid so that the check cannot be used again. A cancelled cheque is a cheque bearing the account holder’s name, account number and has CANCELLED inscribed across it.

16. Cheque Stubs

This is the part of a check that is kept by the payee with information such as the check number, date, and amount.

17. Employee Timecard

This is also called a timesheet, is a method for recording and tracking the amount of an employee’s time spent on each job

18. Board minutes or minutes of meetings

The secretary of the board usually takes minutes during meetings. Written minutes are distributed to board members before each meeting for member’s review.

19. Goods Dispatched Note (GDN)

This a document of the company that lists the goods sent out to a customer. The company will keep one record of goods dispatched notes. This is because, if there is any case of any queries by customers about the goods sent. In addition, one copy is sent to accounts department to process invoice to the customer.

20. Goods Issues Note (GIN)

This is a physical record of the movement of goods or materials from the warehouse or store to production department. It results in a decrease in stock from the warehouse.

21. Stock take Records

This is also called stock counting. It is when you manually check and record all the inventory that your business currently has on hand

22. Stock Record (i.e., Bin card)

A Bin Card is a card indicating quantitative records of the receipts, issues and balances etc.

23. Goods Received Note (GRN)

This is the type of document that shows the goods that a business has received from a supplier. Moreover, this kind of record is used by the buyer for comparing the number of goods ordered to the ones delivered.

24. Remittance advice

This is accounting documents sent to a supplier with a payment, detailing which invoices are being paid and which credit notes offset. It also confirms the amount being paid, so that any discrepancies can be easily identified and investigated.

25. Insurance Endorsement Certificates

This is where one party will add the other party as an “additional insured” on their commercial liability insurance policy.

26. Point of Sales Summaries

This is used to record a number of sales at a cash register.

27. Memorandum

Memo is a written document businesses use to communicate an announcement, policy changes, price increases or notification to take an action, such as attend a meeting, or change a current production procedure.

28. Computer-generated Receipts

This is receipts generated by computer.

29. Lease Agreement

Lease contracts, also known as rental agreements, are formal documents that identify the lessor, lessee. Also, what’s being leased, whether it’s an asset or a property.

30. Sales Tax Returns

This is the taxpayer’s document of declaration. This will enable the taxpayer to furnish the transaction details during a tax period and deposits his Sales Tax liability.

31. Cash Register Tapes

This allows you to keep a record of all customer transactions and/or provide them with a receipt.

32. Adjustment Notes

This is also known as credit notes or refunds which are issued to customers for damaged, returned or undelivered goods

33. Employee Pay Advice

This is any document that provides written evidence of employee income.

34. Payroll Advice Report

This Payroll reports help small businesses understand payroll costs and summarize payroll data.

35. Evidence of Sale or Disposal of Assets

Asset disposal is the removal of a long-term asset from the company’s accounting records.

Conclusion

Kindly add your own source documents not listed amng the Top 35 Source Documents in Accounting listed above. This will help us to update our records accordingly.

Watch several videos of how to prepare financial statements from source documents

Prepare Financial Statements from Source Documents Part 1-3 – YouTube

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PAY-AS-YOU-EARN AND PAYSLIP

PAY-AS-YOU-EARN AND PAYSLIP

PAY-AS-YOU-EARN

Pay-as-you-earn is a tax deducted from employee salary account and remitted on or before the 10th day of the month following the month in which salaries were paid. See relevant sections of the Personal Income Tax Act (PITA). (S.81 of Personal Income Tax Act Cap P8 LFN 2011). S. for details

WHAT IS TAXABLE ENTITLEMENT (GROSS) OR GROSS EMOLUMENTS

This is the total amount your employer pay to you as salary including all benefits arising from employment.

It can be a inform of wages, salaries, allowances including benefits in kind, gratuities, superannuation and any other incomes derived solely by reason of employment.

All manner of allowance you earn, provided it’s not a re-imbursement of expense to you, is taxable. 

Finance Act 2020, defined “gross income” as income from all sources less non-taxable income, tax-exempt items listed in Paragraph (2) of the Sixth Schedule and all allowable business expenses and capital allowance (finance-act-2020). This is addition to the Act.

For example, if you spend an amount for training outside your station and the money is refunded or reimburse through your payslip, it must be subjected to tax. All pay not intended to be taxed must not be passed through payroll. Pay like training cost, transport to attend training etc.

TAX RELIEF (TAX ALLOWANCE)

This is amounts that can be deducted from a person’s annual income to reduce the amount on which tax is paid. Or the amount of your income which is exempt from tax aside from other statutory deductions.

  • Consolidated relief allowance of N200, 000 or 1 per cent of gross salary or whichever is higher plus 20 per cent of gross salary.
  • Percentage of Gross Income Relief (PGI): This relief is graduated and it is based on your Gross income. The higher your income, the more relief you receive. PGI relief is currently 20%. For example, if your Gross income per annum is N5, 000,000 then your PGI would be N1, 000,000.

TAX EXEMPT

The tax law provides certain payroll deductions as tax exempt or non-taxable deductions.  Tax exempt amount has to be removed from Gross taxable Income (earnings) before applying the tax rules to determine tax. The following deductions are not Taxable (.i.e. Tax Exempts):

  • Pension Deductions (employer 10% and employee 8% of Basic salary, transport and housing allowance).
  • National Housing Fund Deductions (Employee 2.5% of basic salary).
  • Life Assurance Payments (this is obtained from the employee life policy document and monthly premium payment receipt is sufficient evidence to earn the tax exempt. Section 33(3) of Finance Act 2020 added that any premium payment. stated that there shall be allowed a deduction of annual amount of any premium paid by the individual during the year preceding the year of assessment to an insurance company in respect of insurance on his life or the life of his spouse or of a contract for a deferred annuity on his own life or the life of his spouse (finance-act-2020). This is addition to the Act.
  • The National Health Insurance Scheme (Government 10% and employee 5% of basic salary) but employer 5% has not be implemented yet in the federal government MDAs due to Labour objections.
  • Gratuity.

NIGERIA TAX TABLE

for pay-as-you-earn to be done, relief allowance and tax exemptions have been granted to work with, the balance of the income shall be taxed as specified in the tax table below.

Nigerian Payroll tax table comes in annual gross bands in six rows. Each band has a percentage tax value attached to it. The tax table rates must be applied to the Net Taxable Income to get Tax Payable.

Tax table and Rates from June 2011 tax year as see below.

TAXABLE INCOME (NET)

This is derived after deducting the following from Gross Taxable Income. Some are extracted from payslip.

  • Gross Entitlement,
  • Tax Exempts, and Relief (Tax Allowance).
  • Apply tax table to the net amount as stated above

NON TAXABLE INCOME

  • End of year award
  • Compensation for personal injury
  • Any compensation for loss of office or employment
  • Medical or dental expenses incurred by employee

Note:

Compensation for loss office or employment

(1) Section 36(2) of Finance Act 2020 is amended by substituting for subsection 2 with a new subsection “2”.

(2) Sums obtained by a way of compensation for loss of office, up to a maximum of N10,000,000, shall not be chargeable gains and subject to tax under the Act. Provided that any sum in excess of N10, 000,000 shall not be so exempted but the excess amount shall be chargeable gains and subject to tax accordingly.

Finance Act 2020 inserted section (3) and (4)

(3) Any person who pays compensation for the loss of office to individual is required, at the point of payment of such compensation, to deduct and remit the tax due under this section to the relevant tax authority.

(4) The tax so deducted shall be remitted within the time specified under the Pay-As-You-Earn regulations issued pursuant to the personal income tax Act.

PAY-AS-YOU-EARN CALCULATION

In other word, monthly payments of Pay-As-You-Earn (PAYE) tax liabilities are to be made on or before the 10th day of the month following the applicable month (e.g. January tax to be remitted by 10th of February).

Assuming Senior Manager monthly payslip is as shown below. We look at how the statutory deductions were determined.

Pay-as-you-earn and Payslip Sample

Taxable Income Calculation for an Senior Manager whose Gross Income is NGN 4.68 Million per annum

Taxable income

Below is the basis of Pay-as-you-earn calculation for a Senior Manager whose gross income is NGN 4.68 million per annum. The accountant has the responsibility to ensure that this PAYE is calculated accurately and deducted promptly

 

Taxable per annum or per month

WHAT IS RESIDENCY RULE

Assuming the Senior Manager live in Rivers State but work in Abia State.

To apply residency rule, an employee’s PAYE is payable to the tax authority of the state of his/her residence. It is therefore the duty of the employer to deduct and remit it to the tax authority where the employee is resident.

If the employee is resident in Rivers State, the tax authority that is entitled to his pay-as-you-earn is the Rivers State Board of Internal Revenue.

PENALTY FOR FAILURE TO DEDUCT PAY-AS-YOU-EARN

In line with Section 74(1) of Personal Income Tax Act, 2011 states “ any person or body corporate who fails to deduct, or having deducted, fails to remit such deductions to the relevant tax authority within 30days. This will be from the date the amount was deducted or the time the duty to deduct arose. Such person shall be liable to a penalty of an amount of 10% of the tax not deducted or remitted in addition to the amount of tax not deducted or remitted plus interest at the prevailing monetary policy rate of Central Bank of Nigeria.

EXEMPTION OF MINIMUM WAGE EARNERS FROM PAYE/PIT

Section 37 of Finance Act 2020 “provided for minimum tax. The Act also provided for under the Sixth Schedule to this Act shall not apply to a person in any year of assessment where such person earns the National Minimum Wage or less from an employment (finance-act-2020)

BOOKS OF ACCOUNTS

By Section 12 of PITA 2011 stated that the keeping of books of accounts is very important. The Act stated that, if any taxable person fails or refuses to keep account, such a person shall be liable on conviction to a penalty of N50,000 for individuals and N500,000 for corporate entities.

Video:

How to calculate Staff Salary and Pay-As-You-Earn(PAYE) in Nigeria

SUMMARY

Ensure full compliance with the law. You can consult us for your professional services.

Friday Ojeaburu ACA, PhD

ohimaiconsulting@yahoo.com

Accountant is a value creator

Accountant is a value creator

Value creation is giving something valuable to receive something else that’s more valuable to you. As accountant, you are known to create value.

You can create value in the following ways, but not limited.

  • Establish any kind of business of your choice
  • Establish accounting training school
  • Establish audit firm
  • Establish only tax preparation firm
  • Establish finance software tutoring
  • Establish collection agency
  • Establish micro financing company
  • Establish accounting or management consulting firm
  • Establish a cooperative society either in your office or outside your office
  • Become a writer in the field of accounting
  • Become an accounting lecturer. etc

It does not matter how you started. The only way to start is to start.

As someone that has creative skill, any business you establish must succeed.