Financial accounting can be defined as recording, classifying, summarizing and interpreting the financial data. Alternatively you call this definition as Accounting cycle.
The first step is to record the financial aspect of transaction in books of accounts. in accounting terms this is called journalizing ( i.e recording transaction in a book which is called Journal). The entry in journal is made from the source document.
Types of Source Documents
There are mainly two types of source document. One is internally generated source document and other is externally generated source document. The source documents are used to record transaction in the books of account. it is important to remember that sometime more than one source document or combination of source documents is used to record a transaction
1.Internally Generated Source documents
The document which is generated within the organization is know as internally generated source document. The example of internally generated source document included sales invoice, Purchase order, production reconciliation, Normal loss report, Good received and dispatch note etc.
2.Externally Generated Source Document
The document generated or created outside the organization is know as external source documents. The example of external source documents includes vendor invoice, Shipping company confirmation of delivery, etc.
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