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Financial Accounting · Double-entry bookkeeping principles including the maintenance of accounting records

Maintenance of Accounting Records and Source Documents

Updated 11 October 2026 · Fact-checked

Accounting records are the organised books and files a business keeps to show what it owns, owes, earns and spends. Source documents such as invoices, credit notes, receipts and statements are the evidence behind each entry. To answer exam questions, identify the document, what it proves, and which book it is first recorded in.

Understand Maintenance of Accounting Records and Source Documents

A business needs a reliable record of every transaction. Owners use it to manage the business. Tax authorities use it to check tax due. Auditors use it to test the financial statements. Lenders and suppliers use it to judge the business. Without records, you cannot prepare accounts, and you cannot prove what happened.

Every entry starts with a source document. This is the first piece of evidence that a transaction took place. Common examples are:

  • Quotation: a seller's price offer. It is not yet a transaction.
  • Purchase order: the buyer's request to buy goods. It is not yet recorded in the accounts.
  • Goods received note (GRN): proof the buyer received the goods.
  • Delivery note: sent with the goods. The buyer checks it against the order.
  • Invoice: a request for payment. It shows goods, quantities, prices, sales tax and payment terms. The seller records a sales invoice as a sale. The buyer records it as a purchase.
  • Credit note: reduces the amount owed. It is issued for returns, damaged goods or pricing errors.
  • Debit note: sometimes used by the buyer to ask for a credit note. It is a request, not a record of a sale.
  • Statement: a summary from a supplier of invoices, credit notes and payments for a period. It is used to check the payables ledger.
  • Remittance advice: tells the supplier which invoices a payment covers.
  • Receipt: proof of payment.

Documents are first recorded in books of prime entry, such as the sales day book, purchases day book, returns day books and cash book. Totals are then posted to the ledger using double entry.

A coding system gives each account and often each product, customer or supplier a unique code. Codes speed up posting, reduce errors, help find records and make reports easier to produce. A good code is unique, consistent and logical. For example, all sales accounts might start with 4 and all payables with 3.

Businesses must retain records for the period required by law. This period differs by country, and often by type of record. For exam answers, say records must be kept for the legal minimum in the relevant jurisdiction, and do not state a fixed number of years as a worldwide rule. Records should be kept safe, be accessible and be protected from loss and unauthorised change.

Key formulas to remember

Source document to record flow
Source document → book of prime entry → ledger account → trial balance → financial statements
Use this order to decide where a document is first recorded.
Invoice amount with sales tax
Gross invoice = Net amount + Sales tax
Sales tax = net amount × tax rate. The exam gives the rate.
Credit note effect
Net balance owed = Invoices − Credit notes − Payments
A credit note reduces the receivable for the seller and the payable for the buyer.
Document purpose rule
Invoice = demand for payment; Credit note = reduction; Statement = summary; Receipt = proof of payment
Most objective questions test these definitions.
Good code rule
Unique + consistent + logical + easy to extend
Use these features to judge a coding system.

How to solve Maintenance of Accounting Records and Source Documents questions

Use this method for any question on records, documents or coding.

  1. 1Read the question and identify what is asked: a document, a purpose, a book of prime entry, a coding feature or retention.
  2. 2Underline the key facts, such as who issued the document and what happened (goods returned, payment made, order placed).
  3. 3Match the event to the document. Returns point to a credit note. A request for payment points to an invoice. Proof of payment points to a receipt.
  4. 4Decide whose viewpoint is used. A sales invoice for the seller is a purchase invoice for the buyer.
  5. 5If a book of prime entry is asked for, link it to the document: sales invoices to the sales day book, credit notes issued to the sales returns day book.
  6. 6Check amounts: net, sales tax and gross. Work out any missing figure.
  7. 7Test each option and remove ones that are only partly true. In multiple response, select exactly the stated number.

Quickest way: Document, book, viewpoint

When to use it: Use for one-line objective test questions on documents and records.

  1. Name the document in two or three words.
  2. Ask: does it start a transaction, prove it or change it?
  3. Pick the matching book of prime entry.
  4. Check whose books the question is about.
  5. Choose the option with no wrong detail.

Common mistakes in Maintenance of Accounting Records and Source Documents

  • Treating a purchase order or quotation as a record of a transaction.

    Both documents mention goods and prices, so they look like invoices.

    Fix: Remember that no accounting entry is made until goods are supplied and invoiced. Orders and quotations are not recorded in the ledgers.

  • Confusing an invoice with a statement.

    Both list amounts owed.

    Fix: An invoice relates to one transaction. A statement summarises many items over a period and is used for reconciliation.

  • Recording a credit note as a sale or purchase.

    The word 'credit' suggests a credit sale.

    Fix: A credit note reduces sales or purchases. Record it in the returns day book.

  • Mixing up the seller's and buyer's viewpoints.

    The same document appears in both sets of books.

    Fix: Write S or B beside the question before answering. The seller's sales invoice is the buyer's purchase invoice.

  • Stating one fixed retention period for all countries.

    Students memorise a number from a local rule.

    Fix: Say records must be kept for the period required by local law. Only use a number if the question gives it.

  • Describing a code as only a label.

    Students overlook why coding is used.

    Fix: Link codes to accuracy, speed of posting, easy retrieval and reporting. Add that codes must be unique.

Worked examples

Example 1

A business sells goods with a list price of $4,000 and sales tax of 20%. The customer later returns goods with a net value of $500. What is the total shown on the credit note, and which book of prime entry records it in the seller's records?

Show the solution
  1. Net value of returned goods = $500.
  2. Sales tax on the return = $500 × 20% = $100.
  3. Gross credit note = $500 + $100 = $600.
  4. The seller records a credit note issued to a customer in the sales returns day book.

Answer: The credit note totals $600 and is recorded in the sales returns day book.

Example 2

A supplier's statement shows a balance of $9,000. It includes invoice A of $5,000 and invoice B of $4,000. Your payables ledger shows invoice A only, and a credit note of $600 was received for invoice A but is not on the statement. What balance should the ledger show if both records are correct, and which document explains the difference?

Show the solution
  1. Ledger shows invoice A of $5,000 less credit note $600 = $4,400.
  2. Invoice B of $4,000 is not in the ledger yet.
  3. If it is valid, the ledger would be $4,400 + $4,000 = $8,400 after recording invoice B.
  4. Statement $9,000 less the unrecorded credit note $600 = $8,400.
  5. The difference of $600 is explained by the credit note.

Answer: The balance should be $8,400 after recording invoice B. The credit note explains the $600 difference.

Exam tips

  • Learn each document in one sentence: what it is, who issues it and what it proves.
  • In multiple response questions, select exactly the stated number and check each option separately.
  • For number entry, calculate sales tax on the net amount unless the question gives a gross figure.
  • Read for the viewpoint: seller or buyer.
  • For retention questions, choose answers referring to the legal requirement, not a fixed number of years.

Practice questions from Double-entry bookkeeping principles including the maintenance of accounting records

Maintenance of Accounting Records and Source Documents in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Maintenance of Accounting Records and Source Documents: frequently asked questions

What are source documents in accounting?

They are the first evidence of a transaction, such as invoices, credit notes, receipts and statements. Entries in the books of prime entry are made from them. Auditors use them to check that entries are genuine.

Why do businesses keep accounting records?

They keep them to prepare financial statements, manage the business and meet legal and tax duties. Records also support audits and help settle disputes. They show what is owed to and by the business.

Why is a coding system important in accounting?

Codes identify accounts, customers, suppliers or products in a unique, consistent way. This speeds up posting and cuts errors. It also makes records easier to find and report on.

How long should accounting records be kept?

It depends on the law of the country where the business operates, and the period can vary by record type. Check the local requirement. Keep records at least that long and store them securely.