C1 - section 1. Business transactions.

Question 1

Name 4 financial transaction categories

Answer 1

• Credit sales
• Credit purchases
• Cash sales
• Cash purchases

Question 2

Sales, purchases and expenses

Answer 2

• Sales and purchases can be made by cash or credit.

- How we view the transactions will depend on if we are the seller or the buyer.

Question 3

Where are cash sales and cash purchases usually made?

Answer 3

• A cash sale or purchase will usually be made in a retail environment.
  1. Customer enters shop and selects items they want to purchase.
  2. Seller tells customer the total price.
  3. Customer pays in coins/notes or credit/debit card.
  4. Seller provides a receipt of goods purchased - automatic (such as till roll) or handwritten.

Question 4

how are credit sales/purchases made?

Answer 4

• The sale or purchase process will usually be initiated by the seller receiving an order from a customer.
• Purchase order from customer may in in writing, telephone, email, fax or website.
• The seller then decides whether to offer credit and the period of time the customer has to repay it.

Question 5

is offering credit risk free?

Answer 5

• Selling goods carries risk.
• Goods are taken away or delivered to the customer with the promise of payment.
• Decisions about offering credit can include whether the customer is a new or existing customer.

Question 6

what to consider when offering credit to existing customers?

Answer 6

if an existing customer wishes to make further purchases on credit, it is normal practice to do some checks:

• Check their established credit limit.
• Do not exceed the credit limit between he old and new purchases.
• Check the customer has been making regular payments without issues.

Question 7

What to consider when offering credit to new customers?

Answer 7

If a new customer asks for credit, it is normal to carry out checks:

• Ask the customer to supply some trade references (names of other businesses that they trade with on credit)
• A business may ask check a customers creditworthiness through credit agencies or by asking for references from the customers bank.
• set an appropriate credit limit for the sale to go ahead.