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When Completing The Accounting Cycle, The Accounting Professional Uses Source Documents. Discuss The Importance Of The Accuracy Of These Source Documents. What Problems Might Arise If The Source Documents Are Inaccurate?

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Samantha Mitchell Profile
The accounting cycle includes:

  1. Identifying the transaction
  2. Analyzing the transaction
  3. Journal entries
  4. Post ledger
  5. Trial balance
  6. Adjusting entries
  7. Adjusted trial balance
  8. Financial statements
  9. Closing entries
  10. After closing trial balance
Based on the 10 steps of the accounting cycle, it is clear why an accountant would need to use source documents that are accurate. All of the transactions need to be identified and analyzed to prove they are appropriate purchases or deposits. Looking at receipts written in hand is not going to be helpful as it cannot be proven that they are true transactions.

More importantly, source documents have to be used to verify information written in journals and the ledger in order to show without a doubt that all entries are proper and accurate. If inaccuracies are found in the source documents, it can lead to improper tax filings, even tax fraud. In other words, tax fraud occurs when inaccurate information is given though it is also given with full knowledge that there are inaccuracies.

An accountant can be held accountable if they do not check the accuracy of information given to them, this includes source documents. Not all of the documents need to be checked thoroughly such as calling the place the transaction occurred, but the entries should be verified in the accountant documents to show that all transactions are accounted for, both in source documents and the journal.

If there is a document to support an entry then it will be counted as accurate and therefore the accountant has done their job. If a fake document is given or a fake transaction occurs the accountant can also be held accountable.

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