1) Financial Transactions Flashcards
Sales documentation
Sales documentation
- Price enquiry and quotation received from supplier
- Purchase order placed with supplier - can involve bulk
buy discount. - Delivery with delivery note (goods received note).
- Sales invoice or statement received from supplier requesting payment- can be completed using the information from the quotation and purchase order. To create a sales invoice, you must agree to the quality supplied to the signed delivery note and review the quotation for discounts offered.
- Remittance advice sent to supplier with payment
Coding sales
Coding sales
.When a business processes sales invoices and credit notes, it codes them so they can be entered into the accounting system quickly and easily. Usually, two sets of codes are used.
CUSTOMER CODES
.A customer code identifies the customer. It may be
ALPHABETICAL (JUST LETTERS) OR NUMERICAL (JUST
NUMBERS). Usually, letters will be used that relate to the
numbers. Customer name or business name FIRST TWO
LETTERS OF THEIR NAME THEN NUMBER DEPENDING
ON HOW MANY CUSTOMERS BEFORE START WITH THE
FIRST LETTER OF THEIR NAME
.EXAMPLE - Eccles & Co = EC01, so next customer Everly’s
= EV02.
.EV02 BECAUSE PREVIOUS CUSTOMER STARTS
WITH E.
Delivery note?
Delivery note?
.Accompanies goods received from a supplier.
Quotation?
Quotation?
.A formal document setting out the quantity, description, cost of an item or service.
Goods received note?
Goods received note?
.An internal document that a customer uses to record details of goods received.
Price list?
Price list?
.List of prices for a particular customer or set of items.
Quote and prompt payment discount
Quote and prompt payment discount
.Quote to supply goods costing £3600 plus VAT.
.A prompt payment discount of 2% has been offered for
payment within 14 days.
.Answer if paid within 14 days = add VAT then take away 2% will be the amount paid = £4,233.60
Revenue expenditure
Revenue expenditure
.Money spent on the day-to-day running of the business.
.Generally, these costs are for items that will last under a year but will not add any value to a fixed asset.
Capital expenditure
Capital expenditure
.Money spent on buying or increasing the value of a non-currant/fixed asset.
.A non-current asset is something that is bought for use by the company and will normally last for more than 1 year.
Non-current assets/ fixed assets
Non-current assets/ fixed assets
.Are the items that add value to the business and are brought to assist in the running of the business (items
that last for over a year).
Current assets
Current assets
.Are items that the business owns but which quickly change in value from day to day.
Non-current liabilities
Non-current liabilities
.Are long-term debts. Any debts payable over more than a year can be classified as long-term.
Current liabilities
Current liabilities
.Are essentially short-term debts (to be paid within a year).
Cash transaction
Cash transaction
.Means that payment has been made immediately (whether this is in cash, by cheque, BACS, debit/ credit
Card etc).
Credit transaction
Credit transaction
.Means that items have been brought or sold but
payment has not yet been made. This is what forms a
debtor (receivables)/ creditor (payables) relationship.
Purchases
Purchases
.Goods purchased for resale and are posted to the
purchases account.
.Purchases made for items that are not to be resold are
posted to their own separate account, individually
named e.g. rent, stationery.
Receivables
Receivables
.Customers who have not yet paid their account balance.
Payables
Payables
.Are suppliers to whom the business owes money to.
Net invoice value
Net invoice value
.Means the amount shown before VAT has been added
but after any trade discount has been deducted.
Gross invoice value
Gross invoice value
.Means the amount shown already has VAT added.
Trade discount
Trade discount (unconditional discount)
.Taken off the goods total to achieve the NET VALUE prior
to adding any VAT. The discount value would not be
posted separately in the accounts.
Cash/ settlement discount (conditional discount)
Cash/ settlement discount (conditional discount)
.Means there are conditions attached to the discount e.g.
discount allowed only if payment is made within 7 days.
The invoice is therefore posted with the full value; only at
the payment date will the discount be given if the terms
are met.
A contra entry
A contra entry
.Is a transfer of funds between two internal accounts. No
external transaction has occurred; you have merely
moved something from one business account to
another.
Direct debit
Direct debit
.Allows a varying amount to be collected from a
business’s bank account on a regular basis.
Standing order
Standing order
.Is a payment of a fixed amount from a business’s bank
account on a regular basis.
Checking purchase order
Checking purchase order
.Price
.Quantity
.Price and quantity match quote, delivery note,
.Trade and bulk discount has been deducted from the
NET AMOUNT.
.Date
.Terms of payment
Two-column cash book
Two-column cash book
.Each column represents a separate account. This would
be used for an organisation that regularly has customers
paying in physical cash and the organisation chooses to
keep some of the cash in hand to pay for some of its
purchases.
.Bank column = records total amounts going into or out
of the bank account.
.Cash column = shows transactions that are in the form
of actual physical cash.
The following transactions must be separately recorded;
.Receipts into and payments out of the organisation
bank account; as detailed on the bank statements.
.Receipts of and payments out of cash by the
organisation.
.There are other columns to analyse the totals.
Paypal
Paypal
.Online method of paying and receiving money within a
business by e-mail instead of bank details. Fees should
be accounted for as an expense to the business.
Unrepresented cheques
Unrepresented cheques
.Cheques sent to suppliers. Items found on the credit side of the cash book but not showing in the bank statement because the cheque hasn’t cleared yet.
Outstanding lodgements
Outstanding lodgements
.Cheques from customers. Items found on the debit side of the cash book but not showing in the bank statement because cheque hasn’t cleared yet.
Cheque 3 parties
Cheque 3 parties
Cheque 3 parties
- Bank that issued the cheque book = DRAWEE
- Person writing the cheque = DRAWER
- Person cheque is being paid to = PAYEE
.You have to bank a cheque within 6 months
BACS
BACS
.Bankers’ Automated Clearing Services
Paying in slip
Paying in slip
.Items need listing on the reverse of a paying in slip are
cheques.
