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AAT UNIT 1 | Chapter One > Business Documents For A Credit Transactiom > Flashcards

Business Documents For A Credit Transactiom Flashcards

1
Q

What should a quote have in the top left corner?

A

Name, address and contact details of a business quoting price

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2
Q

How should a quote be finished?

A

With an authorised signature

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3
Q

Why should a quote include regarding the goods?

A

Details of the goods as well as price being quoted

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4
Q

What is the quote important?

A

Because this is the price at which your organisation is now contracted to sell the goods.

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5
Q

Do quotes have to be authorised by an appropriate person in the organisation?

A

Yes

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6
Q

What is a discount?

A

A discount is a reduction in the price of the sales of goods or services

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7
Q

What are the different types of discounts?

A

Trade discount, bulk discount, prompt payment discount

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8
Q

What is the intention of a trade discount?

A

Encouraging and rewarding customer loyalty

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9
Q

How will trade discount appear on an invoice?

A

It will be deducted from the list price of goods before VAT is calculated.

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10
Q

Who gives a bulk discount?

A

It is given by the supplier for sales orders above a certain quantity

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11
Q

How must a bulk discount be checked?

A

To ensure the correct amount has been deducted

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12
Q

What is prompt payment discount also known as?

A

Settlement or cash discounts

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13
Q

Why are prompt payments offered?

A

To encourage early payment of invoice

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14
Q

Where are the details of a pro opt payment discount usually shown?

A

At the bottom of an invoice

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15
Q

What is a purchase order?

A

A buyer generated document that authorises a purchase transaction

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16
Q

How can an order be made?

A

Via a website, telephone, email or in writing.

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17
Q

What can you check in a purchase order?

A

Does the price match the quote
Are delivery terms acceptable
Are any discounts applicable

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18
Q

What is at the top of a purchase order?

A

Name and address of business placing the order

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19
Q

What is important to be included on a purchase order?

A

An order date, sequential order number, VAT registration number of the business placing the order

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20
Q

What is a sales order?

A

A seller generated document that authorises a sale to a customer issued after the receipt of a purchase order

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21
Q

What does a sales order confirm?

A

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

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22
Q

What happens when negotiations over the price and terms of the credit sale have been completed?

A

The goods will be delivered

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23
Q

What is a delivery note?

A

A document accompanying foods despatched to a customer explaining what the delivery contains.

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24
Q

How many parts to a delivery note?

A

3

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25
Q

What is a goods received note?

A

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

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26
Q

What is the goods received note often compared to?

A

The purchase order as part of a pay,ent authorisation process

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27
Q

A goods received note contains:

A

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

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28
Q

What is the definition of a sales invoice?

A

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

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29
Q

When the goods have been delivered, what happens?

A

The seller must prepare and send out the sales invoice

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30
Q

How would a sales invoice be prepared in a manual system?

A

Details shown on a delivery note. Price, discounts, and VAT are shown on the sales invoice, with a VAT number if applicable

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31
Q

Do sales orders have preprinted sequential numbers?

A

Yes

32
Q

How is the sales order produced in a co pure riser system?

A

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

33
Q

Where are unit prices for goods or services kept?

A

In master files, which must be updated regularly

34
Q

Do prices on quotes include VAT?

A

Normally, no

35
Q

What is the definition of VAT?

A

A consumption tax added to the products selling price.

36
Q

What is VAT charged on?

A

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

37
Q

What is output tax?

A

The tax charged on the sale of goods and services

38
Q

What is input tax?

A

The tax paid on the purchase of goods and services

39
Q

What is taxable supply?

A

The supply of all items except those which are exempt

40
Q

Explains of exempt items?

A

Certain land and buildings
Insurance
Post office charges
Betting, gaming

41
Q

Can income tax be reclaimed where the traders supplies are all exempt?

A

No

42
Q

How many rates of VAT on taxable supplies are there?

A

Three

43
Q

Define zero rated tax

A

Similar to exempt, except that input tax can be reclaimed

44
Q

What is the special rate for domestic fuel and power?

A

5%

45
Q

Example of zero rated items?

A

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

46
Q

What is non-deductible tax?

A

Vat on purchases of these items can never be deducted, the business has to bear the VAT as an expense.

47
Q

Example of non-deductible items?

A

Motor cars, business entertaining

48
Q

What is a taxable person?

A

Any individual, partnership, company etc, who intends to make taxable supplies and is liable to register.

49
Q

When is a person liable to register?

A

If the value of taxable supplies exceeds a specified amount in 12 month period

50
Q

Define NET

A

A net amount excluded VAT

51
Q

How to work VAT from the NET amount?

A

Add 20% … NET X 20 = ? X 100

52
Q

Define gross amount

A

A gross amount includes VAT

53
Q

How to work out VAT from the gross amount?

A

Divide the gross amount by 6

54
Q

When is VAT calculated?

A

After trae
De and bulk discounts have been deducted from the original list price

55
Q

What amount to the VAT amount when a customer takes advantage of the prompt payment discount?

A

The VAT amount is adjusted

56
Q

What do you need to prepare an invoice?

A

The customer master file, showing any discount given or offered to the customer

57
Q

Define purchase order

A

An invoice is a document that itemises a transaction between a buyer and a seller

58
Q

What happens when a customer receives their purchase invoice from the seller?

A

A number of checks need to be made before it can be passed for payment

59
Q

What must the purchase invoice received be agreed to?

A

The purchase order, the delivery note, and goods received note

60
Q

It is important to check the description and the quantity of the goods per invoice against…?

A

The purchase order and delivery note

61
Q

What calculations on an invoice should be checked?

A

All pricing calculations, trade discount, vat calculations, total additional of the invoice

62
Q

What are four common terms and conditions shown on invoices?

A

E&OE
Carriage paid
Ex works
Cash on delivery

63
Q

What does E&OE mean on an invoice?

A

Errors and omissions excepted… selling is claiming to right to correct errors on the invoice at a later date.

64
Q

What does carriage paid on invoice mean?

A

The invoice value includes delivery of the goods to the customers premises

65
Q

What does ex works on an invoice mean?

A

Prices quoted do not include delivery

66
Q

What does cash on delivery mean on an invoice

A

The customer is expected to pay for the goods when they are delivered

67
Q

Define credit note

A

Document issued by. A supplier to a customer cancelling part or all of the sales invoices

68
Q

When would a business issue a credit note?

A

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

69
Q

Why is a credit note issued?

A

Document evidence that goods have been returned and that or or some of the previous invoice has been cancelled.

70
Q

What is the return of goods often accompanied by?

A

A goods returned note

71
Q

Define goods returned note?

A

Document sent to the supplier by the customer detailing the goods returned and reasons for the return being made

72
Q

What are the content of the goods returned note similar to?

A

A goods received note, but with the added detail on why the return is being madr

73
Q

What happens when the supplier receives returned goods?

A

They must be inspected, counter and recorded on receipt.

74
Q

Who should authorise a credit note?

A

A supervisor

75
Q

When doesn’t a credit note need an inwards note?

A

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

76
Q

What detail does a credit note include?

A

All the details that would normally appear on a sales invoice

AAT UNIT 1 | Chapter One (4 decks)

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