Business Documents For A Credit Transactiom Flashcards
What should a quote have in the top left corner?
Name, address and contact details of a business quoting price
How should a quote be finished?
With an authorised signature
Why should a quote include regarding the goods?
Details of the goods as well as price being quoted
What is the quote important?
Because this is the price at which your organisation is now contracted to sell the goods.
Do quotes have to be authorised by an appropriate person in the organisation?
Yes
What is a discount?
A discount is a reduction in the price of the sales of goods or services
What are the different types of discounts?
Trade discount, bulk discount, prompt payment discount
What is the intention of a trade discount?
Encouraging and rewarding customer loyalty
How will trade discount appear on an invoice?
It will be deducted from the list price of goods before VAT is calculated.
Who gives a bulk discount?
It is given by the supplier for sales orders above a certain quantity
How must a bulk discount be checked?
To ensure the correct amount has been deducted
What is prompt payment discount also known as?
Settlement or cash discounts
Why are prompt payments offered?
To encourage early payment of invoice
Where are the details of a pro opt payment discount usually shown?
At the bottom of an invoice
What is a purchase order?
A buyer generated document that authorises a purchase transaction
How can an order be made?
Via a website, telephone, email or in writing.
What can you check in a purchase order?
Does the price match the quote
Are delivery terms acceptable
Are any discounts applicable
What is at the top of a purchase order?
Name and address of business placing the order
What is important to be included on a purchase order?
An order date, sequential order number, VAT registration number of the business placing the order
What is a sales order?
A seller generated document that authorises a sale to a customer issued after the receipt of a purchase order
What does a sales order confirm?
The terms on which goods will be sold including:
Quantity/types of goods or service
Date of supply and delivery address
Price and payment terms including any discounts given or offered
What happens when negotiations over the price and terms of the credit sale have been completed?
The goods will be delivered
What is a delivery note?
A document accompanying foods despatched to a customer explaining what the delivery contains.
How many parts to a delivery note?
3
What is a goods received note?
This is an internal document completed by the purchaser that records the details of good ps received and contains similar information to a delivery note
What is the goods received note often compared to?
The purchase order as part of a pay,ent authorisation process
A goods received note contains:
Supplier name
Quantity / type of goods or service
The associated purchase order reference and delivery note number
The name and reference of the carrier for delivery
What is the definition of a sales invoice?
A document that itemises a transaction between a buyer and a seller. It is a request for the buyer to make payment for goods sold or services provided by seller
When the goods have been delivered, what happens?
The seller must prepare and send out the sales invoice
How would a sales invoice be prepared in a manual system?
Details shown on a delivery note. Price, discounts, and VAT are shown on the sales invoice, with a VAT number if applicable
Do sales orders have preprinted sequential numbers?
Yes
How is the sales order produced in a computriser system?
It would normally be produced at the same time as the delivery note and will be identical, except the delivery note will not have details of price and will usually be a different colour
Where are unit prices for goods or services kept?
In master files, which must be updated regularly
Do prices on quotes include VAT?
Normally, no
What is the definition of VAT?
A consumption tax added to the products selling price.
What is VAT charged on?
The taxable supply of goods and services in the UK by a taxable person in the course of a business carried on by that person
What is output tax?
The tax charged on the sale of goods and services
What is input tax?
The tax paid on the purchase of goods and services
What is taxable supply?
The supply of all items except those which are exempt
Explains of exempt items?
Certain land and buildings
Insurance
Post office charges
Betting, gaming
Can income tax be reclaimed where the traders supplies are all exempt?
No
How many rates of VAT on taxable supplies are there?
Three
Define zero rated tax
Similar to exempt, except that input tax can be reclaimed
What is the special rate for domestic fuel and power?
5%
Example of zero rated items?
Water, and most types of food (not cafe/restaurant or hot food as a service is also provided.
Books and newspaper
Drugs and medicines
Children’s clothing and footwear
What is non-deductible tax?
Vat on purchases of these items can never be deducted, the business has to bear the VAT as an expense.
Example of non-deductible items?
Motor cars, business entertaining
What is a taxable person?
Any individual, partnership, company etc, who intends to make taxable supplies and is liable to register.
When is a person liable to register?
If the value of taxable supplies exceeds a specified amount in 12 month period
Define NET
A net amount excluded VAT
How to work VAT from the NET amount?
Add 20% … NET X 20 = ? X 100
Define gross amount
A gross amount includes VAT
How to work out VAT from the gross amount?
Divide the gross amount by 6
When is VAT calculated?
After trae
De and bulk discounts have been deducted from the original list price
What happens to the VAT amount when a customer takes advantage of the prompt payment discount?
The VAT amount is adjusted
What do you need to prepare an invoice?
The customer master file, showing any discount given or offered to the customer
Define purchase order
An invoice is a document that itemises a transaction between a buyer and a seller
What happens when a customer receives their purchase invoice from the seller?
A number of checks need to be made before it can be passed for payment
What must the purchase invoice received be agreed to?
The purchase order, the delivery note, and goods received note
It is important to check the description and the quantity of the goods per invoice against…?
The purchase order and delivery note
What calculations on an invoice should be checked?
All pricing calculations, trade discount, vat calculations, total additional of the invoice
What are four common terms and conditions shown on invoices?
E&OE
Carriage paid
Ex works
Cash on delivery
What does E&OE mean on an invoice?
Errors and omissions excepted… selling is claiming to right to correct errors on the invoice at a later date.
What does carriage paid on invoice mean?
The invoice value includes delivery of the goods to the customers premises
What does ex works on an invoice mean?
Prices quoted do not include delivery
What does cash on delivery mean on an invoice
The customer is expected to pay for the goods when they are delivered
Define credit note
Document issued by. A supplier to a customer cancelling part or all of the sales invoices
When would a business issue a credit note?
When a customer returns faulty or damaged goods
Make a refund for short deliveries
Settle a dispute
Adjust an account after taking advantage of a prompt payment
Why is a credit note issued?
Document evidence that goods have been returned and that or or some of the previous invoice has been cancelled.
What is the return of goods often accompanied by?
A goods returned note
Define goods returned note?
Document sent to the supplier by the customer detailing the goods returned and reasons for the return being made
What are the content of the goods returned note similar to?
A goods received note, but with the added detail on why the return is being madr
What happens when the supplier receives returned goods?
They must be inspected, counter and recorded on receipt.
Who should authorise a credit note?
A supervisor
When doesn’t a credit note need an inwards note?
An error may have been made in pricing on an invoice but the customer is satisfied with the goods and does not want them returned
What detail does a credit note include?
All the details that would normally appear on a sales invoice
