Which of the following is the best definition of a source document in the accounting process?

• A. A summary report showing the financial position of a company at a specific point in time.
• B. A ledger account used to record all cash transactions.
• C. A written or electronic record that provides evidence of a business transaction.
• D. A document used to prepare adjusting entries at the end of an accounting period.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a source document in the accounting process. A source document is a written or electronic record that provides evidence of a business transaction. It serves as the original record for accounting entries and is essential for verifying the accuracy of financial data.
2. Step 2: Analyze the options provided in the question. Each option describes a different accounting concept or tool, but only one aligns with the definition of a source document.
3. Step 3: Eliminate incorrect options. For example, 'A summary report showing the financial position of a company at a specific point in time' refers to a balance sheet, not a source document. Similarly, 'A ledger account used to record all cash transactions' describes a cash ledger, and 'A document used to prepare adjusting entries at the end of an accounting period' refers to a worksheet or adjusting entry documentation.
4. Step 4: Identify the correct option. The definition 'A written or electronic record that provides evidence of a business transaction' matches the concept of a source document, as it is the foundational record for accounting entries.
5. Step 5: Conclude that the correct answer is the option describing 'A written or electronic record that provides evidence of a business transaction,' as it accurately defines a source document in the accounting process.