CHAPTER 1 Flashcards
Business Transaction and Documentation
Business
A commercial organisation, large or small, which exists to make money or profits for its owner
Types of business transaction
Cash & Credit
Credit transaction
Sale or purchase which occurs some time earlier than cash is received or paid
Cash transaction
Buyer pays cash to the seller at the time the goods or services are transferred
Profit
Excess of income over expenditure
Entity
People join together to achieve a common end
Business
- Organisation existing to trade and make a profit , inluding sole trader
- NOT include charity/local authority
Company
Entity constituted in a particular legal form, usually involving limited liability,, need not to be business(charity)
External documentation
- Letter of inquiry
- Quotation
- Sales order document
- Acknowledgment
- Delivery note
- Invoice
- Credit note
Internal documentation
- Purchase order
- Inventory list
- Supplier list
- Staff schedules
- Good received notes
- Expense claim
Purpose of accounting system
Record, summarise and present the information contained in the documentation generated by transactions
Sales order
Customer writes out order/signs an order for goods/services want to buy
From supplier –> customer
Confirming order after purchase order is received
Purchase order
Business places an order with another business for purchases of goods/services
Invoice
A demand for payment
Contain of invoice
- Name & address (seller)
- Name & address (purchaser)
- Invoice number
- Date of transaction
- Description of sale
- Quantity & unit price
- Total amount invoice
- Details of sale tax
Other possible details :
- Delivery address (when goods want to be delivered to other premises)
- Referencing (order number)
- Date by which payment is due
‘Net 30 days’
Payment is due 30 days after the date of delivery
3 different uses of Invoice
- Invoice as receipt of payment (Cash transaction)
- Invoice sent from seller to buyer and paid on receipt of the goods (COD invoice)
- Invoice sent after goods have been delivered, pay within certain time (Credit Invoice)
FOB (detail on invoice)
“Free on Board” - supplier pays all costs of carriage up to point of shipping (import/export invoice)
E&OE (detail on invoice)
“Error and omissions excepted” - supplier reserve the right to make alterations to the details as shown on the invoices
