Business documentation Flashcards
What is the definition of accounting?
The process of recording a business’s financial transactions.
What is a sole trader?
- Owned and managed by one person.
- Can employ one or two assistants.
- Contributes all capital, receives all benefits and is liable for all debts.
What is a partnership?
-Owned and managed by two or more people.
-Profits are shared in accordance with a profit-sharing agreement.
-Partners are jointly responsible for debts.
What is a limited liability company?
-Shareholders and managers of the business are separate.
-Business’s debts and the personal debts of shareholders are separate.
-Shareholders cannot be sued for the debts of the business unless given personal guarantee.
What is a cash sale?
-Sale and payment happen at the same time.
-Payment made using cash, cheque, debit and credit.
-Minority of a business’s sales, except for retailers.
-Primary documentation is a till receipt.
What is a credit sale?
-Seller provides the goods or service but no payment is made.
-The seller invoices the buyer and the payment is made 30-60 days later depending on credit terms.
-Majority of goods or services are sold on credit.
-Primary documentation is an invoice.
What are the risks of credit sales?
-Payment may not be made at the correct time.
-May not pay at all.
What are the six stages of the sales process and the examples of documentation?
-Quotation is requested for goods/services (price list).
-Order is placed (customer order/sales order).
-Goods are despatched (delivery note).
-Payment is requested (invoice)
-Goods may be returned to vendor (credit note).
-Payment is made (remittance advice note).
*Credit notes are issued if goods are unsatisfactory.
What is the process of the three-way matching technique used to check details of a business document?
-Check the details on the sales order match those on the delivery note which match those on the invoice.
What is a quotation?
-A written statement sent from the supplier to customer advising them of the price of a specific good or service (or both).
What is a customer order?
-A customer order is a request by a customer to purchase a specific quantity of goods/services from an individual or organisation.
What is a delivery note?
-A note that accompanies the shipment of goods.
What is an invoice?
-Shows the goods or services provided to a customer with a statement of the amount required to be paid.
What are the five key points about VAT?
-A business that is registered for VAT must charge VAT on its sales.
-The current rate of VAT is 20%.
The amount before VAT is added is known as the net amount.
-Gross amount = net amount + VAT.
-VAT = net amount x rate of VAT (20%).
What is a credit note?
-A document issued to a customer who returns goods, showing the details of the goods returned and their value.
What is a remittance advice note?
-A document sent with a payment setting out which amounts are being paid and whether any credit notes are being applied.
What are the types of coding systems?
-Numerical code.
-Alphabetical code.
-Alphanumerical code.
What is a numerical coding system?
-All documents are given a sequential code number or document number, with the most recent document being given the document number that immediately follows the one before.
-Example 29th Aug 20XX is 1204 and 30 Aug 20XX is 1205.
What is a alphabetical code?
-Documents are filed in alphabetical order.
What is a alphanumerical code?
-There is an initial run of letters that tells us something about the items being coded. For example the letters may be the first few letter of a supplier name or a customer name.
-The alpha run is followed by a sequential numerical system as well.
For Example, Wellington Ltd - WEL001 Wells & Co - WEL002.
