The primary purpose of a source document is to assist in which of the following accounting activities?

• A. Preparing the financial statements
• B. Reconciling bank statements
• C. Calculating depreciation expense
• D. Providing evidence for recording transactions in the accounting records

Answer: (D)

Verified step by step guidance

1. Understand the role of a source document in accounting: A source document is a piece of evidence that records the details of a transaction, such as invoices, receipts, or contracts. It serves as the foundation for recording transactions in the accounting system.
2. Recognize that preparing financial statements is a later step in the accounting process, which relies on summarized and classified data from the accounting records, not directly on source documents.
3. Understand that reconciling bank statements involves comparing the bank's records with the company's accounting records to identify discrepancies. While source documents may be used during reconciliation, their primary purpose is not reconciliation.
4. Learn that calculating depreciation expense is based on accounting policies and formulas applied to fixed assets, not directly tied to source documents.
5. Conclude that the primary purpose of a source document is to provide evidence for recording transactions in the accounting records, ensuring accuracy and compliance with accounting principles.