Chapter 20- Business Documents

Question 1

Why are business documents important?

Answer 1

They provide a record of a business’ transactions with other businesses and customers

Question 2

What is a letter of enquiry?

Answer 2

A letter (or email) of enquiry is sent by the buyer to the seller asking about particular items and their terms of sale

Question 3

What are terms of sale?

Answer 3

They are the conditions attached to the sale of a product and subsequent sale. They are included in a quotation and an invoice.

Question 4

What is a quotation?

Answer 4

A quotation is a written document that is sent by a seller to a potential buyer and shows the price of the goods and any terms of sale.

Question 5

What is an order?

Answer 5

An order is a written document sent by a buyer to a seller requesting the supply of the quantity of goods listed.

Question 6

What is an invoice?

Answer 6

An invoice is a document sent by the seller to the buyer with the goods or shortly after the delivery of them. It gives details of the quantity, price of the goods being sent, terms of sale and details about carriage.

Question 7

What is carriage?

Answer 7

The transportation of goods.

Question 8

What is a delivery note/ docket?

Answer 8

A delivery note is a document sent by the seller to the buyer that lists the items being delivered.

Question 9

What is a credit note?

Answer 9

A credit note is a document that is sent by the seller to the buyer to decrease the amount owed by them. It is issued when goods that have been purchased on credit are returned to the seller and it would not be appropriate to provide a cash refund.

Question 10

What are some terms of sale?

Answer 10

Delivery, E & OE, Price held, Trade discount, Cash discount, VAT, CWO, COD, Payment terms.

Question 11

Delivery:

Answer 11

If a quotation says “carriage paid”, the seller of the goods will cover the cost of delivering the goods to the buyer. Otherwise, they will give a cost for postage or a courier.

Question 12

E & OE:

Answer 12

This stands for errors and omissions expected. This means that the business will not be held responsible is an error has been made and can alter the price in the case that is has.

Question 13

Price held:

Answer 13

The prices quoted might be valid for only a limited time. This encourages the customer to order quickly.

Question 14

Trade discount:

Answer 14

This is a reduction of the selling price given to business customers. It is subtracted before the VATis added on.

Question 15

Cash discount:

Answer 15

An extra discount may be given if the goods are paid for in a short period of time (e.g. cash discount is 5% for fourteen days). Sellers offer this extra incentive to encourage quick payment by buyers.

Question 16

VAT:

Answer 16

This is a tax on goods and services. It must be charged on each transaction in the channel of distribution.

Question 17

CWO:

Answer 17

Cash With Order: payment must be made when the order is placed for the goods.

Question 18

COD:

Answer 18

Payment for the goods must be made when they are delivered.

Question 19

Payment terms:

Answer 19

This is where details of the credit and payment terms are given. E.g. each buyer may have up to thirty days to pay for the goods.

Question 20

What is a debit note?

Answer 20

A debit note is sent by the seller to the buyer and will increase the amount owed by them. It is used when there has been an undercharge on an account.

Question 21

What is a statement of account?

Answer 21

A statement of account is sent by the seller to the buyer and is a summary of all the transactions between the two firms over a particular period of time. It shows the full amount owed and will act as a request for any payment still owed at the end of the month.

Question 22

What is a receipt?

Answer 22

A receipt is a written document stating that the goods have been paid for. It is signed by the seller and given to the buyer.