Transactions, Source Documents and Vouchers: where every entry begins
- Tell what a business transaction is and spot its two-fold (give and take) effect
- Name common source documents like cash memo, invoice, receipt, pay-in-slip and cheque
- Tell the difference between a source document and an accounting voucher
- Identify transaction, debit, credit and journal (complex) vouchers and fill a voucher neatly
Welcome to Chapter 3! Till now we talked about what accounting is and the rules behind it. From today we start actually recording. But an accountant never writes anything just because someone said so. Every single entry needs proof — a bill, a receipt, a cheque counterfoil. Today we learn what counts as a transaction, what that proof is called, and how an accountant turns the proof into a neat slip called a voucher. This lesson is short and easy, but it carries 3-mark theory questions almost every year.
1. What is a business transaction?
Ritu's father runs Sharma Stationery near the bus stand. One morning he buys a printer from a computer shop for ₹14,000 and pays in cash. The shop hands him the printer and a cash memo. Look at what happened: the business gave ₹14,000 cash and took a printer. Two things changed at the same moment.
This give-and-take is the heart of every business transaction. Money (or money's worth) moves between two parties, and the business is affected in two ways at once.
Business transaction: an exchange of economic value (money or money's worth) between the business and another party, which can be measured in money and which changes the financial position of the business. Every transaction has a two-fold effect, so it is recorded in at least two accounts.
1.1 Three quick checks
Before recording anything, an accountant asks three questions:
- Is it related to the business (not the owner's personal life)? Paying the shop's electricity bill — yes. Paying the owner's child's school fees from his own pocket — no.
- Can it be measured in money? "Our salesman is very polite" is valuable, but you cannot write it in rupees.
- Has an exchange actually happened? Getting a phone call for an order worth ₹50,000 is only an event. No goods have moved and no money has moved yet, so nothing is recorded.
| Event | Transaction? | Two-fold effect |
|---|---|---|
| Bought goods for ₹20,000 in cash | Yes | Goods come in, cash goes out |
| Sold goods to Meena on credit ₹8,000 | Yes | Goods go out, Meena now owes us ₹8,000 |
| Paid shop rent ₹6,000 by UPI | Yes | Rent (an expense) is incurred, bank balance goes down |
| Received an order for goods worth ₹30,000 | No | Nothing exchanged yet |
| Hired a new helper (salary starts next month) | No | No money moved yet |
Students often write "placing an order" or "appointing a manager" as a transaction. Both are important events, but no value has been exchanged yet. The transaction happens later — when goods are delivered or when salary is paid.
2. Source documents: the proof behind every entry
Imagine an accountant writes "Paid ₹25,000 for repairs" in the books, and there is no bill for it. Later the owner or an auditor asks, "Where is the proof?" There is none. Such books cannot be trusted. That is why accounting follows a simple rule: no document, no entry.
Source document: the original written (or electronic) evidence of a business transaction, such as a cash memo, invoice, receipt, pay-in-slip, cheque or salary slip. It shows the date, the parties, the amount and the nature of the transaction.
2.1 Common source documents
| Document | What it proves | Example at Sharma Stationery |
|---|---|---|
| Cash memo | A cash purchase or cash sale | Bought a printer for ₹14,000 cash |
| Invoice / bill (GST tax invoice) | A credit purchase or credit sale, with quantity, rate and GST | Bought notebooks worth ₹40,000 from Gupta Wholesalers on credit |
| Receipt | Money was received (the payer keeps it as proof of payment) | Landlord's receipt for rent ₹6,000 |
| Pay-in-slip | Cash or cheque deposited into the bank (the counterfoil is stamped by the bank) | Deposited ₹50,000 in the bank |
| Cheque (and its counterfoil) | Payment made or received through the bank | Paid Gupta Wholesalers ₹40,000 by cheque |
| Debit note / credit note | Goods returned, or an amount to be adjusted with a party | Returned damaged pens worth ₹1,200 |
| Salary slip / wages sheet | Salary or wages paid to staff | Salary ₹12,000 paid to the shop assistant |
| UPI / net-banking payment confirmation, bank statement | Digital receipts and payments | Customer paid ₹2,500 through a UPI QR code |
Today much of the proof is digital: an e-invoice with a QR code, a UPI transaction ID, an e-mail from the bank. They are source documents too, as long as they carry the date, amount, parties and a reference number. Businesses keep printouts or saved copies in an organised way.
2.2 What if there is no document?
Some small expenses do not come with a bill — tea for a customer (₹40), a porter's charge (₹100), bus fare for the peon (₹30). For such petty expenses, the business prepares its own slip, writes the details, and gets it approved and signed by an authorised person (the owner or manager). That signed slip becomes the proof.
3. Accounting vouchers
A source document comes in all shapes and sizes. One supplier's bill is A4, another is a tiny thermal paper slip, a third is an e-mail. Also, a source document only tells what happened; it does not tell which accounts to debit and credit. So the accountant prepares a standard slip inside the business, attaches the proof to it, and writes the accounting details on it. This slip is called an accounting voucher.
Accounting voucher: a document prepared by the business, on the basis of a source document, which shows the accounts to be debited and credited, the amount and a short explanation (narration), and is signed by the person who prepared it and the person who authorised it. All recording in the books of account is done on the basis of vouchers.
NCERT sometimes uses the words "source document" and "voucher" loosely for the same idea, because both are evidence. For exams, remember the difference below — it is a common 3-mark question.
| Basis | Source document | Accounting voucher |
|---|---|---|
| Who prepares it | Usually the other party (seller, bank, landlord) | The business's own accountant |
| Purpose | Proves that the transaction happened | Shows how it will be recorded (debit and credit accounts) |
| Format | No fixed format; differs from party to party | A standard format decided by the business |
| Order | Comes first | Prepared from the source document; the document is attached to it |
4. Types of accounting vouchers
Vouchers are grouped by how many accounts are debited and credited. (Do not worry about the words "debit" and "credit" yet. For now: every transaction has at least one account on the debit side and at least one on the credit side. Lesson 3 explains which is which.)
| Type of voucher | Debits | Credits | Example |
|---|---|---|---|
| Transaction voucher (simple) | One | One | Bought furniture for ₹12,000 cash |
| Debit voucher (compound) | Many | One | Paid rent, electricity and telephone bills together from the bank |
| Credit voucher (compound) | One | Many | Bought a machine for ₹60,000: ₹20,000 in cash and ₹40,000 still owed to the supplier |
| Journal voucher / complex voucher | Many | Many | Several accounts on both sides in one transaction |
Name the voucher after the side that has many lines. Many debits → Debit voucher. Many credits → Credit voucher. Many on both sides → Journal (complex) voucher. One and one → Transaction voucher.
NCERT also mentions cash vouchers as a class (vouchers for cash receipts and cash payments). There is no single fixed format for any voucher; each business designs its own, often using different coloured paper for different types so they are easy to tell apart.
(a) Sold old newspapers for ₹300 cash.
(b) Paid ₹15,000 by cheque: ₹9,000 for salary and ₹6,000 for rent.
(c) Bought a computer for ₹45,000, paying ₹10,000 through UPI and the rest on credit from Tech Point.
- (a) One account receives (cash), one gives (sale of scrap). One debit, one credit.
- (b) Two expenses (salary, rent) are debited; only the bank is credited. Many debits, one credit.
- (c) Only the computer is debited; bank ₹10,000 and Tech Point ₹35,000 are credited. One debit, many credits.
A shop pays from its bank account in one go: electricity ₹3,200, internet ₹999 and water charges ₹450. Which type of voucher will be prepared?
5. What a voucher looks like
Here is a filled transaction voucher. Read each line slowly — every item has a purpose.
| Transaction Voucher — Sharma Stationery, Khurja Road, Aligarh | |
|---|---|
| Voucher No. | 27 |
| Date | 6 April 2026 |
| Debit account | Furniture A/c |
| Credit account | Cash A/c |
| Amount (₹) | 12,000 |
| Narration | Bought a steel almirah for the shop from Verma Furniture, cash memo no. 418 |
| Prepared by | Neha (Accountant) — signature |
| Authorised by | R. K. Sharma (Owner) — signature |
A debit voucher has one credit account at the top and a small table of debit accounts below it (S. No., Code, Account Name, Amount, Narration). A credit voucher is the reverse: one debit account at the top and a table of credit accounts. A journal voucher has two tables — one for debit accounts and one for credit accounts.
- Accounts debited: Rent, Electricity, Telephone (three). Account credited: Bank (one). So it is a debit voucher.
- Credit amount = 8,000 + 2,450 + 1,199 = ₹11,649. The total of the debit accounts must equal this.
Debit Voucher — Sharma Stationery | Voucher No. 31 | Date: 12 April 2026 Credit Account: Bank A/c | Amount: ₹11,649 S. No. Account Name Amount (₹) Narration 1 Rent A/c 8,000 Shop rent for April 2 Electricity A/c 2,450 Bill for March 3 Telephone A/c 1,199 Monthly plan Total 11,649 - Prepared by: Neha | Authorised by: R. K. Sharma. The three bills are attached behind the voucher.
A credit voucher shows Machinery A/c ₹75,000 as the only debit account. The credit accounts are Cash A/c ₹15,000, Bank A/c ₹48,500 and Singh Engineering (supplier) for the balance. How much is written against Singh Engineering?
5.1 Essential elements of a good voucher
Whatever the design, an accounting voucher should have:
- Good quality paper (it has to last for years).
- The name of the firm printed at the top.
- The date of the transaction — not the date on which it is being recorded.
- A serial number, in order.
- The names of the accounts to be debited and credited.
- The debit and credit amounts in figures.
- A description (narration), account-wise.
- The name and signature of the person who prepared it.
- The name and signature of the authorised person.
If a bill dated 28 March reaches the accountant on 3 April, the voucher carries 28 March, the date of the transaction. Writing the date of recording is a common mistake, and it can put the transaction in the wrong accounting year.
A voucher has been prepared and signed by the accountant. Whose signature is still needed before it can be recorded?
6. Keeping vouchers safe
- Vouchers are arranged in date order, serially numbered and kept in a separate file (or folder on the computer).
- They must be preserved at least till the audit of the accounts and the tax assessments for that period are complete. The auditor checks entries against vouchers; the tax officer may ask for them too.
- In computerised accounting (Tally, Busy, ERP software), the voucher is entered on screen with the code number and name of each account, and the software records it. The source documents are still kept as proof.
7. The big picture
Here is the path every transaction travels. You will study each step in this chapter and the next ones.
| Step | What happens | Where |
|---|---|---|
| 1 | Transaction takes place; proof is received | Source document |
| 2 | Accountant decides debit and credit, gets approval | Accounting voucher |
| 3 | Recorded date-wise for the first time | Journal (book of original entry) — Lesson 4 |
| 4 | Transferred to separate accounts | Ledger (principal book) — Lesson 6 |
| 5 | Summarised and reported | Trial balance and financial statements |
- Paid ₹500 for repair of the shop's fan
- Sold goods for ₹2,000 on credit
- Received a phone order for goods worth ₹25,000 to be delivered next week
- Deposited ₹10,000 cash into the bank
- Transaction voucher
- Debit voucher
- Journal voucher
- Credit voucher
Board tip: For "Differentiate between source documents and vouchers" (3 marks), give 3 clear points in a table: who prepares it, purpose, and format. For "State any four essential elements of a voucher" (2 marks), list the date of transaction, serial number, accounts debited/credited with amount, and signatures of preparer and authorised person.
📌 Points to remember (Quick Revision)
- A business transaction is an exchange of money or money's worth; it always has a two-fold (give and take) effect.
- Orders, enquiries and appointments are events, not transactions, until value is exchanged.
- Source documents (cash memo, invoice, receipt, pay-in-slip, cheque, salary slip) are the proof; no document, no entry.
- An accounting voucher is prepared by the business from the source document and shows accounts debited and credited, amount, narration and signatures.
- Types: transaction (1 Dr, 1 Cr), debit voucher (many Dr, 1 Cr), credit voucher (1 Dr, many Cr), journal/complex voucher (many both).
- Vouchers carry the transaction date, are serially numbered and kept till audit and tax assessment are over.
Pressing this saves your progress on this phone/computer.