Every business transaction needs evidence. Source documents provide the original proof of transactions, supporting accuracy, accountability, and transparency in financial reporting. These documents feed into the books of original entry (day books), which then support ledgers, and ultimately the financial statements. Seeing how this chain works helps explain why source documents are essential for reliable decision-making and effective control within organisations.

This chapter introduces common source documents - quotations, invoices, credit/debit notes, receipts, and statements - that support accurate recording and financial reporting.

Learning objective

By the end of this lesson, you should be able to:

Summarise the contents and purpose of different types of business documentation
Identify the main types of business transactions, for example, sales, purchases, payments, and receipts.

Definitions

Source documents: They are the original records that provide evidence of business transactions such as sales and purchases, among others.

Source documents form the foundation for financial statements because the totals and balances shown in the financial statements come from transactions first recorded using these documents.

Types of source documents

These source documents include:

Quotation
Sales order
Purchase order
Goods received note
Goods dispatched note
Sales invoice
Supplier (purchase) invoice
Supplier statement
Credit note
Debit note
Remittance advice
Receipts

The summaries of the content and purpose of these documents are discussed below.

Quotation

Definitions

Quotation: It is a formal business document issued by suppliers (sellers) to potential customers (buyers), detailing their offer to provide specific goods or services.

A quotation usually includes prices, quantities, specifications, delivery terms, and payment conditions. It’s often an early step in the sales process, helping buyers compare offers from different suppliers.

A quotation typically contains the supplier’s and buyer’s details, a unique reference number, a validity period, and the relevant terms and conditions. While it isn’t usually legally binding on its own, it shows the supplier’s intention to honour the stated terms within the validity period. If the buyer accepts it, the quotation can form the basis of a legally binding contract between the buyer and the seller.

Sales order

Definitions

Sales order: It is issued by a supplier (seller) to the customer (buyer) as a confirmation of the customer’s commitment to purchase specific goods or services.

A sales order is generated after a customer (buyer) accepts a quotation or places a direct order, often through a purchase order. It records the order details and starts the sales fulfilment process.

Sales orders are usually sequentially numbered so they can be tracked. A typical sales order includes:

Customer details (name, addresses, contacts)
Order details (date, reference number, products, quantities, prices)
Delivery requirements
Payment terms

Sales orders also provide the basis for other documents, such as invoices.

Purchase order (PO)

Definitions

Purchase order: A document issued by a buyer (customer) to a seller (supplier), officially requesting or ordering goods or services.

A purchase order represents a legally binding contract once accepted by the supplier. It forms the foundation of the buying entity’s procurement process.

A PO typically includes the buyer’s details, PO number, issue date, delivery address, an itemised list of goods or services requested, quantities, agreed prices, and the relevant terms and conditions.

It also usually states delivery requirements and payment terms. Like sales orders, POs are sequentially numbered for tracking purposes.

Goods received note (GRN)

Definitions

Goods received note: It is a document issued by the buyer (customer) when deliveries from suppliers (seller) are received.

A GRN is proof that goods have been received, and it records their condition on arrival. It’s usually prepared after comparing the physical delivery to the original purchase order.

A GRN typically includes the delivery date, supplier information, purchase order reference, descriptions of items received, quantities, and any discrepancies or damages. Receiving staff usually signs it to confirm acceptance or to note issues.

The GRN supports the procurement cycle by enabling three-way matching between purchase orders, supplier invoices, and actual deliveries. This helps prevent payment for goods that were not delivered (or were delivered damaged) and supports accurate inventory records.

Goods despatched note

Definitions

Goods despatched note (GDN): Also known as a delivery note, is a document issued by the supplier (seller) when goods are sent out to customers (buyer).

A GDN is proof that goods have been shipped and documents the transfer of goods from seller to buyer. It usually accompanies the goods during transit and helps the customer verify what was delivered.

A GDN typically includes the date of dispatch, customer details, delivery address, order reference number, descriptions of items shipped, quantities, packaging details, and any special handling instructions. It often requires the recipient’s signature on delivery as proof that the goods were received.

Invoices

Invoices usually follow from either a sales order or a purchase order. For that reason, you’ll often see them described as either a sales invoice or a purchase invoice.

Definitions

Sales invoice: It is issued by a supplier (seller) to a customer (buyer), requesting payment for goods or services provided.

A sales invoice is a legal record of the sale and is important for both accounting and tax purposes. It also states payment terms and methods.

A sales invoice serves several purposes:

Creates a legal obligation for payment
Helps the seller track sales and amounts owed by customers (receivables)
Provides proof of the transaction for both parties

A sales invoice typically includes a unique invoice number, issue date, payment due date, seller’s and buyer’s details (including tax registration numbers), an itemised list of goods/services provided, quantities, unit prices, any discounts applied, and the total amount due.

Definitions

Purchases invoice: Also known as a supplier invoice. It is received from suppliers (sellers) requesting payment for goods or services supplied in relation to a PO.

A purchase invoice (supplier invoice) is, in most respects, the same type of document as a sales invoice - the difference is whether you are viewing it from the seller’s side (sales invoice) or the buyer’s side (purchase invoice).

Supplier statement

Definitions

Supplier statement: It is a periodic (weekly, monthly, quarterly, etc.) document issued by suppliers summarizing all transactions within a specific timeframe.

A supplier statement summarises the transactions between a supplier (seller) and a customer (buyer) over a period and shows the current status of the account.

It typically shows the opening balance, invoices issued, payments received, credit notes, debit notes, and the closing balance. Supplier statements are used to reconcile accounts, track outstanding payments, identify discrepancies, and maintain accurate financial records. Businesses use them to check that their accounts payable records match the supplier’s records and to manage supplier payments effectively.

Credit note

Definitions

Credit note: It is issued by a seller (supplier) to a buyer (customer) to reduce the amount owed from a previous invoice.

A credit note reduces the amount the buyer owes. You can think of it as a negative invoice that reverses part (or all) of a previous charge. Credit notes are commonly issued for returned goods, overpricing errors, damaged items, or agreed discounts. The credit note is also evidence that both parties agree to the reduction.

A credit note typically includes a unique reference number, date, customer details, the original invoice reference, the reason for the credit, and the amount being credited.

Debit note

Definitions

Debit note: It is a formal business document issued by the buyer (customer) to the seller (supplier) to decrease the amount owed.

A debit note has the same purpose as a credit note, but it is issued by the customer (buyer). When the supplier (seller) receives it, it often leads to the supplier issuing a credit note.

Remittance advice

Definitions

Remittance advice: It is a document sent by a payer (buyer) to a payee (seller), detailing a payment made for goods or services.

Remittance advice helps the seller match a payment to the correct invoice(s). It typically includes the invoice number, payment amount, date of payment, and any deductions or adjustments.

Receipt

Definitions

Receipt: It is a written acknowledgment from the payee (seller) to the payer (buyer) confirming that payment has been made (i.e., received) for goods or services.

A receipt is proof that payment was received. It typically includes the date, payer’s details, a description of items, and the total cost. Keeping receipts is often required by law for audit purposes, supporting transparency and accountability in financial dealings.

Source documents provide original evidence of business transactions and form the foundation for financial statements.
Purchase orders are issued by buyers; sales orders are issued by sellers confirming transactions.
Credit notes reduce buyers’ debt; debit notes are issued by buyers to decrease amounts owed.
GRN confirms goods received; GDN accompanies goods during shipment to customers.
Invoices request payment, while receipts acknowledge payment has been received and processed.

Next | 3.2 The general ledger and double-entry bookkeeping

Source document

This chapter introduces common source documents - quotations, invoices, credit/debit notes, receipts, and statements - that support accurate recording and financial reporting.

Learning objective

By the end of this lesson, you should be able to:

Summarise the contents and purpose of different types of business documentation
Identify the main types of business transactions, for example, sales, purchases, payments, and receipts.

Definitions

Source documents: They are the original records that provide evidence of business transactions such as sales and purchases, among others.

Source documents form the foundation for financial statements because the totals and balances shown in the financial statements come from transactions first recorded using these documents.

Types of source documents

These source documents include:

Quotation
Sales order
Purchase order
Goods received note
Goods dispatched note
Sales invoice
Supplier (purchase) invoice
Supplier statement
Credit note
Debit note
Remittance advice
Receipts

The summaries of the content and purpose of these documents are discussed below.

Quotation

Definitions

Quotation: It is a formal business document issued by suppliers (sellers) to potential customers (buyers), detailing their offer to provide specific goods or services.

Sales order

Definitions

Sales order: It is issued by a supplier (seller) to the customer (buyer) as a confirmation of the customer’s commitment to purchase specific goods or services.

Sales orders are usually sequentially numbered so they can be tracked. A typical sales order includes:

Customer details (name, addresses, contacts)
Order details (date, reference number, products, quantities, prices)
Delivery requirements
Payment terms

Sales orders also provide the basis for other documents, such as invoices.

Purchase order (PO)

Definitions

Purchase order: A document issued by a buyer (customer) to a seller (supplier), officially requesting or ordering goods or services.

A purchase order represents a legally binding contract once accepted by the supplier. It forms the foundation of the buying entity’s procurement process.

It also usually states delivery requirements and payment terms. Like sales orders, POs are sequentially numbered for tracking purposes.

Goods received note (GRN)

Definitions

Goods received note: It is a document issued by the buyer (customer) when deliveries from suppliers (seller) are received.

A GRN is proof that goods have been received, and it records their condition on arrival. It’s usually prepared after comparing the physical delivery to the original purchase order.

Goods despatched note

Definitions

Goods despatched note (GDN): Also known as a delivery note, is a document issued by the supplier (seller) when goods are sent out to customers (buyer).

A GDN is proof that goods have been shipped and documents the transfer of goods from seller to buyer. It usually accompanies the goods during transit and helps the customer verify what was delivered.

Invoices

Invoices usually follow from either a sales order or a purchase order. For that reason, you’ll often see them described as either a sales invoice or a purchase invoice.

Definitions

Sales invoice: It is issued by a supplier (seller) to a customer (buyer), requesting payment for goods or services provided.

A sales invoice is a legal record of the sale and is important for both accounting and tax purposes. It also states payment terms and methods.

A sales invoice serves several purposes:

Creates a legal obligation for payment
Helps the seller track sales and amounts owed by customers (receivables)
Provides proof of the transaction for both parties

Definitions

Purchases invoice: Also known as a supplier invoice. It is received from suppliers (sellers) requesting payment for goods or services supplied in relation to a PO.

Supplier statement

Definitions

Supplier statement: It is a periodic (weekly, monthly, quarterly, etc.) document issued by suppliers summarizing all transactions within a specific timeframe.

A supplier statement summarises the transactions between a supplier (seller) and a customer (buyer) over a period and shows the current status of the account.

Credit note

Definitions

Credit note: It is issued by a seller (supplier) to a buyer (customer) to reduce the amount owed from a previous invoice.

A credit note typically includes a unique reference number, date, customer details, the original invoice reference, the reason for the credit, and the amount being credited.

Debit note

Definitions

Debit note: It is a formal business document issued by the buyer (customer) to the seller (supplier) to decrease the amount owed.

A debit note has the same purpose as a credit note, but it is issued by the customer (buyer). When the supplier (seller) receives it, it often leads to the supplier issuing a credit note.

Remittance advice

Definitions

Remittance advice: It is a document sent by a payer (buyer) to a payee (seller), detailing a payment made for goods or services.

Remittance advice helps the seller match a payment to the correct invoice(s). It typically includes the invoice number, payment amount, date of payment, and any deductions or adjustments.

Receipt

Definitions

Receipt: It is a written acknowledgment from the payee (seller) to the payer (buyer) confirming that payment has been made (i.e., received) for goods or services.

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This chapter introduces common source documents - quotations, invoices, credit/debit notes, receipts, and statements - that support accurate recording and financial reporting.

Learning objective

By the end of this lesson, you should be able to:

Summarise the contents and purpose of different types of business documentation
Identify the main types of business transactions, for example, sales, purchases, payments, and receipts.

Definitions

Source documents: They are the original records that provide evidence of business transactions such as sales and purchases, among others.

Source documents form the foundation for financial statements because the totals and balances shown in the financial statements come from transactions first recorded using these documents.

Types of source documents

These source documents include:

Quotation
Sales order
Purchase order
Goods received note
Goods dispatched note
Sales invoice
Supplier (purchase) invoice
Supplier statement
Credit note
Debit note
Remittance advice
Receipts

The summaries of the content and purpose of these documents are discussed below.

Quotation

Definitions

Quotation: It is a formal business document issued by suppliers (sellers) to potential customers (buyers), detailing their offer to provide specific goods or services.

Sales order

Definitions

Sales order: It is issued by a supplier (seller) to the customer (buyer) as a confirmation of the customer’s commitment to purchase specific goods or services.

Sales orders are usually sequentially numbered so they can be tracked. A typical sales order includes:

Customer details (name, addresses, contacts)
Order details (date, reference number, products, quantities, prices)
Delivery requirements
Payment terms

Sales orders also provide the basis for other documents, such as invoices.

Purchase order (PO)

Definitions

Purchase order: A document issued by a buyer (customer) to a seller (supplier), officially requesting or ordering goods or services.

A purchase order represents a legally binding contract once accepted by the supplier. It forms the foundation of the buying entity’s procurement process.

It also usually states delivery requirements and payment terms. Like sales orders, POs are sequentially numbered for tracking purposes.

Goods received note (GRN)

Definitions

Goods received note: It is a document issued by the buyer (customer) when deliveries from suppliers (seller) are received.

A GRN is proof that goods have been received, and it records their condition on arrival. It’s usually prepared after comparing the physical delivery to the original purchase order.

Goods despatched note

Definitions

Goods despatched note (GDN): Also known as a delivery note, is a document issued by the supplier (seller) when goods are sent out to customers (buyer).

A GDN is proof that goods have been shipped and documents the transfer of goods from seller to buyer. It usually accompanies the goods during transit and helps the customer verify what was delivered.

Invoices

Invoices usually follow from either a sales order or a purchase order. For that reason, you’ll often see them described as either a sales invoice or a purchase invoice.

Definitions

Sales invoice: It is issued by a supplier (seller) to a customer (buyer), requesting payment for goods or services provided.

A sales invoice is a legal record of the sale and is important for both accounting and tax purposes. It also states payment terms and methods.

A sales invoice serves several purposes:

Creates a legal obligation for payment
Helps the seller track sales and amounts owed by customers (receivables)
Provides proof of the transaction for both parties

Definitions

Purchases invoice: Also known as a supplier invoice. It is received from suppliers (sellers) requesting payment for goods or services supplied in relation to a PO.

Supplier statement

Definitions

Supplier statement: It is a periodic (weekly, monthly, quarterly, etc.) document issued by suppliers summarizing all transactions within a specific timeframe.

A supplier statement summarises the transactions between a supplier (seller) and a customer (buyer) over a period and shows the current status of the account.

Credit note

Definitions

Credit note: It is issued by a seller (supplier) to a buyer (customer) to reduce the amount owed from a previous invoice.

A credit note typically includes a unique reference number, date, customer details, the original invoice reference, the reason for the credit, and the amount being credited.

Debit note

Definitions

Debit note: It is a formal business document issued by the buyer (customer) to the seller (supplier) to decrease the amount owed.

A debit note has the same purpose as a credit note, but it is issued by the customer (buyer). When the supplier (seller) receives it, it often leads to the supplier issuing a credit note.

Remittance advice

Definitions

Remittance advice: It is a document sent by a payer (buyer) to a payee (seller), detailing a payment made for goods or services.

Remittance advice helps the seller match a payment to the correct invoice(s). It typically includes the invoice number, payment amount, date of payment, and any deductions or adjustments.

Receipt

Definitions

Receipt: It is a written acknowledgment from the payee (seller) to the payer (buyer) confirming that payment has been made (i.e., received) for goods or services.

Source documents provide original evidence of business transactions and form the foundation for financial statements.
Purchase orders are issued by buyers; sales orders are issued by sellers confirming transactions.
Credit notes reduce buyers’ debt; debit notes are issued by buyers to decrease amounts owed.
GRN confirms goods received; GDN accompanies goods during shipment to customers.
Invoices request payment, while receipts acknowledge payment has been received and processed.

Next | 3.2 The general ledger and double-entry bookkeeping

Source document

This chapter introduces common source documents - quotations, invoices, credit/debit notes, receipts, and statements - that support accurate recording and financial reporting.

Learning objective

By the end of this lesson, you should be able to:

Summarise the contents and purpose of different types of business documentation
Identify the main types of business transactions, for example, sales, purchases, payments, and receipts.

Definitions

Source documents: They are the original records that provide evidence of business transactions such as sales and purchases, among others.

Source documents form the foundation for financial statements because the totals and balances shown in the financial statements come from transactions first recorded using these documents.

Types of source documents

These source documents include:

Quotation
Sales order
Purchase order
Goods received note
Goods dispatched note
Sales invoice
Supplier (purchase) invoice
Supplier statement
Credit note
Debit note
Remittance advice
Receipts

The summaries of the content and purpose of these documents are discussed below.

Quotation

Definitions

Quotation: It is a formal business document issued by suppliers (sellers) to potential customers (buyers), detailing their offer to provide specific goods or services.

Sales order

Definitions

Sales order: It is issued by a supplier (seller) to the customer (buyer) as a confirmation of the customer’s commitment to purchase specific goods or services.

Sales orders are usually sequentially numbered so they can be tracked. A typical sales order includes:

Customer details (name, addresses, contacts)
Order details (date, reference number, products, quantities, prices)
Delivery requirements
Payment terms

Sales orders also provide the basis for other documents, such as invoices.

Purchase order (PO)

Definitions

Purchase order: A document issued by a buyer (customer) to a seller (supplier), officially requesting or ordering goods or services.

A purchase order represents a legally binding contract once accepted by the supplier. It forms the foundation of the buying entity’s procurement process.

It also usually states delivery requirements and payment terms. Like sales orders, POs are sequentially numbered for tracking purposes.

Goods received note (GRN)

Definitions

Goods received note: It is a document issued by the buyer (customer) when deliveries from suppliers (seller) are received.

A GRN is proof that goods have been received, and it records their condition on arrival. It’s usually prepared after comparing the physical delivery to the original purchase order.

Goods despatched note

Definitions

Goods despatched note (GDN): Also known as a delivery note, is a document issued by the supplier (seller) when goods are sent out to customers (buyer).

A GDN is proof that goods have been shipped and documents the transfer of goods from seller to buyer. It usually accompanies the goods during transit and helps the customer verify what was delivered.

Invoices

Invoices usually follow from either a sales order or a purchase order. For that reason, you’ll often see them described as either a sales invoice or a purchase invoice.

Definitions

Sales invoice: It is issued by a supplier (seller) to a customer (buyer), requesting payment for goods or services provided.

A sales invoice is a legal record of the sale and is important for both accounting and tax purposes. It also states payment terms and methods.

A sales invoice serves several purposes:

Creates a legal obligation for payment
Helps the seller track sales and amounts owed by customers (receivables)
Provides proof of the transaction for both parties

Definitions

Purchases invoice: Also known as a supplier invoice. It is received from suppliers (sellers) requesting payment for goods or services supplied in relation to a PO.

Supplier statement

Definitions

Supplier statement: It is a periodic (weekly, monthly, quarterly, etc.) document issued by suppliers summarizing all transactions within a specific timeframe.

A supplier statement summarises the transactions between a supplier (seller) and a customer (buyer) over a period and shows the current status of the account.

Credit note

Definitions

Credit note: It is issued by a seller (supplier) to a buyer (customer) to reduce the amount owed from a previous invoice.

A credit note typically includes a unique reference number, date, customer details, the original invoice reference, the reason for the credit, and the amount being credited.

Debit note

Definitions

Debit note: It is a formal business document issued by the buyer (customer) to the seller (supplier) to decrease the amount owed.

A debit note has the same purpose as a credit note, but it is issued by the customer (buyer). When the supplier (seller) receives it, it often leads to the supplier issuing a credit note.

Remittance advice

Definitions

Remittance advice: It is a document sent by a payer (buyer) to a payee (seller), detailing a payment made for goods or services.

Remittance advice helps the seller match a payment to the correct invoice(s). It typically includes the invoice number, payment amount, date of payment, and any deductions or adjustments.

Receipt

Definitions

Receipt: It is a written acknowledgment from the payee (seller) to the payer (buyer) confirming that payment has been made (i.e., received) for goods or services.