Chapter 2 - Financial Documents for Sales

Question 1

What 7 documents are used in the selling process?

Answer 1

1. ) Price Quotation
2. ) Purchase Order
3. ) Delivery Note
4. ) Invoice
5. ) Returns Note
6. ) Credit Note
7. ) Statement

Question 2

What are the two types of discount?

Answer 2

1. ) Bulk Discount

2. ) Trade Discount

Question 3

What is bulk discount?

Answer 3

A discount given by SELLERS to BUYERS who purchase in LARGE quantities e.g. over £10,000.

Question 4

What is trade discount?

Answer 4

An agreed discount that is GIVEN to businesses by suppliers.

Question 5

What are the 5 steps for calculating TRADE DISCOUNT?

Answer 5

1. ) Total price before discount
2. ) Trade discount
3. ) Net price before VAT
4. ) VAT
5. ) Total invoice price

Question 6

What is Prompt Payment Discount (or Settlement Discount)?

Answer 6

A discount offered by the SELLERS to the BUYERS to encourage the buyers to settle STRAIGHT AWAY.

Question 7

What are the 2 ways of adjusting for VAT when PPD is deducted?

Answer 7

1. ) The seller issues a credit note.

2. ) The seller includes a PPD declaration on the invoice.

Question 8

What is VAT?

Answer 8

A UK sales tax on the selling price charged to buyers.

Question 9

When is VAT added?

Answer 9

It is added to the price of items sold after discount has been deducted.

Question 10

What is credit limit?

Answer 10

The maximum amount which the seller will allow the customer to OWE at any ONE TIME.

Question 11

What are the 8 checks that need to be made when checking an invoice?

Answer 11

1. ) Customer
2. ) Correct Place
3. ) Correct Goods
4. ) Quantity
5. ) Unit
6. ) Price
7. ) Correct Discount
8. ) Calculations

Question 12

What calculations will need to be checked for an invoice with trade discount deducted?

Answer 12

Quantity X Unit Price = Total Before Discount

Total Before Discount X Discount% = Discount

Total Before Discount - Discount = Net Total

Net Total X VAT% = VAT

Net Total + VAT = Invoice Total

Question 13

What are two examples of DISCREPANCIES on financial documents?

Answer 13

1. ) The discrepancy is found in the internal checking process, BEFORE the document is issued.
2. ) The buyer finds the discrepancy AFTER the document has been issued.

Question 14

What are the 2 reasons that Coding is important?

Answer 14

1. ) An instant and accurate way of referencing CUSTOMERS, SUPPLIERS, INDIVIDUAL PRODUCTS, PURCHASE ORDERS.
2. ) It enables documents to be filed in an efficient way so they can be ACCESSED easily.

Question 15

What are the 3 ways filing systems can be organised?

Answer 15

1. ) Alphabetically
2. ) Numeric
3. ) Alpha-numeric