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A Level Accounting > Business Documents > Flashcards

Business Documents Flashcards

1
Q

Documents for a credit transaction. Illustrate the flow of documents.

A
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2
Q

Who prepares the purchase order and who is it sent to?

A

prepared by the buyer, and sent to the seller

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3
Q

What details are normally found on a purchase order?

A

-reference number of purchase order
-name and address of buyer
-name and address of seller
-full description of the goods, reference numbers, quantity required and unit price
-date of issue
-signature of person authorised to issue order

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4
Q

In order to keep control over purchases, many businesses do what and why?

A

authorise certain people as buyers. In this way, purchases are controlled so that duplicate or unauthorised goods are not ordered.

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5
Q

What is a delivery note?

A

It accompanies the goods and gives details of what is being delivered. The delivery note, signed by the buyer is proof of delivery - a copy is retained by the carrier.

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6
Q

When is the delivery note prepared?

A

when the business that is selling the good despatches them

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7
Q

What check can the buyer do?

A

ensure that the correct goods have been delivered

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8
Q

True or False. The invoice is the most important document in a business transaction.

A

True

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9
Q

Who prepares the invoice and who is it sent to?

A

prepared by the seller (sales invoice) and is sent to the buyer (purchases invoice) who uses it as a source document for bookkeeping transactions.

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10
Q

What information is found on an invoice?

A

-invoice number (serially numbered)
-name and address of the seller
-name and address of the buyer
-date of sale
-date that goods are supplied, including reference numbers, quantity supplied and unit price
-details of trade discount allowed (if any)
-total amount of money due
-terms of trade

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11
Q

What is VAT?

A

value added tax

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12
Q

Where the seller is registered for VAT, tax must be charged at what rate?

A

Tax must be charged at the appropriate rate on all sales subject to VAT.

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13
Q

What are the terms of trade?

A

are started on the invoice to indicate the date by which the invoice amount is to be paid.

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14
Q

What does the term ‘net’ on an invoice mean?

A

That the invoice total is the amount to be paid.

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15
Q

What does ‘net 30 days’ mean?

A

That the amount is payable within 30 days of the invoice date.

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16
Q

What is trade discount?

A

The amount sometimes allowed as a reduction in price.

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17
Q

Trade discount is to who?

A

To businesses, often in the same trade (but not normally to the general public)

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18
Q

Why is trade discount normally given?

A

For buying in bulk i.e large quantities (this discount is also known as bulk discount)

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19
Q

Trade discount is by who?

A

Wholesalers as a discount to retailers off list prices.

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20
Q

What is cash discount?

A

An allowance off the invoice amount for prompt payment

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21
Q

What is cash discount also known as?

A

Settlement discount

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22
Q

When cash discount is applied, where is it indicated?

A

On the invoice
E.g. 2% cash discount for settlement within 7 days

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23
Q

The buyer can choose to take up cash discount by paying promptly or?

A

Take longer to pay, perhaps 30 days from the invoice date, without cash discount

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24
Q

Compare the amounts to be paid in the following example, where the terms of trade are 2% cash discount for full settlement within 7 days, otherwise net 30 days

A
25
Q

How can invoices be layed out?

A

Handwritten or typed on printed forms or input and printed out on a computer.

26
Q

Invoicing is an ideal function for computerized accounting. What is available for invoice purposes?

A

Pre-printed invoices are available, either in the form of continuous stationery or as separate sheets

27
Q

Increasingly nowadays, how can invoices be sent?

A

Sent electronically as part of the paperless EDI (electronic data interchange) system which integrates the ordering, invoicing, and payment processes

28
Q

Invoice

A
29
Q

What is a credit note?

A

The source document for recording returned goods in the bookkeeping system

30
Q

When does the seller prepare a credit note?

A

If a buyer returns goods for some reason (e.g. faulty goods supplied) , or requires a reduction in the amount owed (the buyer may have been overcharged) the seller prepares the credit note.

31
Q

Why does the seller prepare a credit note?

A

To record the amount of the allowance made to the buyer

32
Q

When does the seller issue a statement of account?

A

At regular intervals, often at the end of each month to each trade receivable

33
Q

Statement of account gives a summary of what?

A

The transactions that have taken place since the previous statement and shows how much is currently owed.

34
Q

The details on a statement are:

A

Name and address of the seller
Name and address of the trade receivable (buyer)
Date of the statement
Details of transactions eg invoices, debit notes, credit notes, payments
Balance currently due

35
Q

Most statements have 3 money columns: what are they?

A

Debit, credit, balance (like a bank statement)

36
Q

What is the debit column used for?

A

used to record the money amount of invoices and debit notes sent to the trade receivable

37
Q

What is the credit column used for?

A

it is for payments received and credit notes issued

38
Q

What is the balance column for?

A

shows the amount due, and is prepared on the ‘running balance’ basis, a new balance is shown after each transaction.
The balance is usually a debit balance, which indicates that the buyer is a trade receivable in the seller’s accounting records

39
Q

some statements of accounts also incorporate what?

A

a remittance advise as a tear-off slip; this is returned to the seller together with the payment.

40
Q

illustrate a credit note

A
41
Q

illustrate a statement of account

A
42
Q

Before payment is made to the seller, the buyer must check what?

A

that the goods have been received and are as ordered

43
Q

Payment can be authorised by who and how can payment be made?

A

made by an appointed employee and made by the means of either a cheque (sent by post) or by bank transfer which passes the money from the buyer’s account to the seller’s account

44
Q

What 2 ways can bank transfers be made?

A

by Bacs (Bacs payment schemes) transfer or by direct transfer between bank accounts using Internet banking

45
Q

If a cheque is posted to the seller, what is sent with it?

A

remittance advise

46
Q

What is a remittance advise?

A

shows the amount of the payment, and the transactions which it relates

47
Q

If a payment is sent by bank transfer, a separate remittance advice will be?

A

mailed or emailed

48
Q

Cash receipts

A
49
Q

paying-in slip

A
50
Q

Most businesses have a bank account into which they pay money using a ———–, and make payments by ———– and ———-.

A

paying-in slip, bank transfers, cheque

51
Q

The paying-in slip counterfoils and cheque counterfoils form what?

A

source documents for the accounting system

52
Q

At regular intervals a bank issues a statement of account to its customers - the statement, which is a source document may show other………

A

receipts and payments, standing orders, direct debits, credit transfers, dishonoured cheques, debit card transactions, debit bank transfers and bank charges

53
Q

Who issues a paying-in book?

A

Paying-in book is issued by the bank to business customers

54
Q

What is the counterfoil in a paying-in book?

A

is the part that is retained by the customer and stamped as a receipt by the bank cashier for the amount being paid in.

55
Q

What is the counterfoil in a cheque book?

A

is the part retained by the payer when the cheque is sent off to the payee (the person who is being paid)

56
Q

The counterfoil in a cheque book gives what information?

A

date of the cheque
the payee
amount being paid
cheque number printed along the bottom

57
Q

illustrate a cheque

A
58
Q
A

A Level Accounting (4 decks)

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