Accounting Source Documents Quiz

1. Which of the following best describes the primary purpose of a source document in bookkeeping?

To serve as the final financial statement for outside investors.
To provide original, objective evidence that a transaction occurred.
To replace the need for an accounting ledger or journal entries.
To list the long-term strategic goals of the corporate executives.

Correct! Source documents provide the mandatory verifiable evidence needed to start the accounting cycle.

Incorrect. The primary purpose is to serve as objective evidence for a transaction before any ledger entries or final statements are made.

2. When a business sells goods to a customer on credit, which document is generated and sent to the buyer?

Purchase Order
Cash Receipt
Sales Invoice
Credit Memo

Correct! A sales invoice details a credit sale, requesting payment from the customer at a later date.

Incorrect. A sales invoice is issued for credit sales. A purchase order comes from the buyer, and a cash receipt is used only when immediate payment is collected.

3. From the perspective of a buyer receiving a bill for utilities, the document received is considered a:

Purchase Invoice
Sales Invoice
Receiving Report
Sales Order

Correct! The bill received from a vendor represents a purchase invoice (or vendor bill) documenting an amount owed.

Incorrect. To the buyer, a vendor bill is a purchase invoice recording an expense or liability. The seller is the one who considers it a sales invoice.

4. Which source document provides independent, external verification of a company's cash inflows and outflows each month?

General Journal
Bank Statement
Petty Cash Voucher
Check Register

Correct! The bank statement is created by an external institution and verifies the cash balances and activity.

Incorrect. Bank statements are external documents that allow bookkeepers to verify and reconcile the internal cash records independently.

5. What document is created before a purchase transaction occurs to formally request a vendor to sell items under specific terms and prices?

Purchase Invoice
Purchase Order
Cash Receipt
Packing Slip

Correct! A purchase order is an authorized offer issued by a buyer to a seller indicating intent to purchase.

Incorrect. A purchase order is the initial formal request sent to a vendor before goods are shipped or billed.

6. Why does an auditor look for a source document when reviewing a business's ledger entries?

To confirm that the recorded financial entries are valid and accurate.
To find out the personal home address of the company's customers.
To see if the bookkeeper has good handwriting.
To automatically calculate the company's net profit margin.

Correct! Auditors trace journal records back to original source documents to verify the validity, amounts, and dates of transactions.

Incorrect. Source documents provide the audit trail needed to prove entries represent authentic financial activity.

7. Which of the following pieces of information would you NOT expect to find on a standard sales invoice?

The date of the sale transaction
A unique invoice tracking number
The market stock price of the buyer's corporation
Descriptions and quantities of items sold

Correct! Corporate stock prices change dynamically and are unrelated to transaction-specific details recorded on an invoice.

Incorrect. An invoice requires transaction dates, unique numbers, and line item descriptions. It does not contain independent corporate stock metrics.

8. If a company pays a vendor by check, what part of the check record is typically retained by the company as the immediate source document?

The actual check given to the vendor
The check stub or carbon copy duplicate
The vendor's corporate charter
A cash receipt issued by the bank

Correct! The check stub or carbon copy duplicate acts as internal proof of payment details before the check clears.

Incorrect. The physical check goes to the vendor. The company retains the check stub or a duplicate copy as its initial internal source document.

9. A customer returns damaged goods to your business. What source document should you issue to reduce the amount that the customer owes you?

Credit Memo
Sales Invoice
Purchase Order
Check Stub

Correct! A credit memo decreases accounts receivable, indicating a reduction in the balance a customer owes.

Incorrect. A credit memo lowers the customer's outstanding credit account balance following a return or pricing error.

10. At which stage of the bookkeeping cycle are source documents reviewed and evaluated?

After closing entries are finalized at the end of the year.
At the very beginning, before entering a transaction into the journal.
Right after generating the final balance sheet report.
Only when an error is caught during trial balance reconciliation.

Correct! Evaluating source documents is the introductory step to determine which accounts are debited and credited.

Incorrect. Source documents are checked at the beginning of the transaction workflow to inform the initial journal entries.

Quiz: Accounting Source Documents