Chapter 29 - Business Documents

Question 1

A letter of enquiry goes from the …. to the ….

Answer 1

Buyer to seller

Question 2

What is the first step a buyer should make before making an order for goods?

Answer 2

Make enquires to find out…
•prices available from different suppliers
•are the goods available when we need them?
•what discounts are being offered for bulk buying?
•terms of sale
•how long it will take to deliver goods and delivery charge
•how goods should be paid for

Question 3

COD

Answer 3

Cash On Delivery

Question 4

CWO

Answer 4

Cash With Order

Question 5

The quotation goes from … to the …

Answer 5

Seller to buyer

Question 6

Quotation

Answer 6

Written document showing prices available from the supplier for goods or services

Question 7

After receiving an enquiry, an efficient firm will…

Answer 7

○Send out quotation as quickly as possible
○Send up-to-date copy of firm’s catalogue/brochure
○Send one of firm’s sales rep to visit the buyer

Question 8

Terms of sale

Answer 8

Refers to any agreements between buyer and seller of goods regarding delivery and payment

Question 9

After receiving a quotation, the buyer should…

Answer 9

○Check prices against other quotations received to see which offers the best value
○Check terms of sale against those offered by other suppliers
○Check how long quotation is valid for

Question 10

The order goes from … to the ….

Answer 10

Buyer to seller

Question 11

Effective purchasing

Answer 11

Means choosing the supplier who offers the best deal in terms of price, quality, delivery and terms of sale

Question 12

Selling goods on credit

Answer 12

Giving goods to the buyer now but asking for payment sometime in the future

Question 13

Why might a firm sell goods on credit?

Answer 13

○Customer needs time to sell the goods and raise money before they can pay for them
○Competitors give credit, so we have to as well
○Way of increasing our sales and therefore our profits

Question 14

How would you check a customer’s creditworthiness?

Answer 14

• Ask customer to provide a reference from their bank
• ” “ “ “ “ trade reference from other firms they have done business with saying they always pay debts on time
• Take a look at the customers accounts
• Pay a credit enquiry agency to check if customer owes money to other firms
• Consult Stubbs Gazette

Question 15

What is Stubbs Gazette?

Answer 15

Gives names of firms that have fallen behind in paying their debts

Question 16

How would you reduce the chance of bad debts happening to us?

Answer 16

• Take out insurance against bad debts
• Offer discounts to customers who pay on time or early
• Only sell for cash
• Send out invoices and statements on time

Question 17

The delivery docket goes from ….. to the …

Answer 17

Seller to buyer

Question 18

The invoice goes from ….. to the …

Answer 18

Seller to buyer

Question 19

What does the invoice include?

Answer 19

○Company name, address and contact details
○Date
○Details of goods purchased
○Price of goods
○VAT
○Total price of order
○Terms of sale
○E&OE

Question 20

VAT

Answer 20

Tax on goods and services

Question 21

Trade discount

Answer 21

A reduction in the price of goods and it is given by the seller to trade buyers

Question 22

Who is a trade buyer?

Answer 22

Someone who:
►Intends to resell goods again e.g Retailer
or
►Uses goods to make other goods they will then sell on to the consumer e.g furniture manufacturer buying wood to make furniture

Question 23

E&OE

Answer 23

‘errors and omissions excepted’. Printed at the end of all business documents and means the seller has the right to correct any errors discovered on the document

Question 24

Before sending an invoice the seller should…

Answer 24

○Check goods listed on the invoice match goods ordered and delivered
○Check prices listed on the invoice are the same as those listed on the original quotation
○Check the correct discounts and terms of sale are written on the invoice
○Make sure the customers address is correct
○Use the details of the invoice to write up the sales book
○File the invoice

Question 25

After receiving an invoice the buyer should…

Answer 25

○Check the goods listed on the invoice were actually received
○Check the prices listed on the invoice are the same as those in the quotation
○Check all calculations
○Use the details of the invoice to write up the purchases book
○Look at the terms of sale see what discounts are available if the bill is paid early
○File the invoice

Question 26

The credit note goes from ….. to the …

Answer 26

seller to buyer

Question 27

What information does the credit note contain?

Answer 27

○Company name, address and contact details
○Consumer's name and address
○Date goods were returned
○Details about goods being returned
○VAT
○Total
○E&OE

Question 28

Before sending a credit note the seller should…

Answer 28

○Check the goods listed on the credit note match the goods returned
○Check prices listed on the credit notes are the same as those listed on the original invoice
○Check the correct discounts and terms of sale are written on the credit note
○Make sure the customers address is correct
○Check all calculations
○Check reasons for return and take any necessary action
○Use the details of the credit notes to write up the sales returns book
○File the credit note

Question 29

After receiving a credit note the buyer should…

Answer 29

○Check the goods listed on the credit note are the same as the goods returned
○Check the prices on the credit note are the same as the prices we were originally charged
○Check the calculations
○Use the details on the credit now to write up the purchase returns book
○File the credit note

Question 30

The statement goes from the … to…

Answer 30

Seller to buyer

Question 31

Statement

Answer 31

A reminder to the buyer of how much they owe and when the payment is required

Question 32

What information does a statement to contain?

Answer 32

• Company name, address and contact details
• Customers name and address
• Date the statement was sent out
• Details of all transactions between the buyer and the seller
• Total amount still owed at the date of the statement
• Terms of sale
• E&OE

Question 33

Before sending a statement the seller should…

Answer 33

○Check all transactions between the firm and the customer are included
○Check the amounts listed on the statement are the same as those listed on the original invoices and credit notes
○Make sure all payments made by the customer have been included
○Check the correct discounts and terms of stale are written on the statement
○Make sure the customers address and details are correct
○Check all calculations
○Take whatever steps necessary to make sure the amount owed is paid on time
○File a statement

Question 34

After receiving a statement to the buyer should…

Answer 34

○Check the amounts listed on the statement are the same as those listed on the original invoices and credit notes
○Make sure all returns and payments have been included on the statement
○Check all calculations
○Take whatever steps necessary to pay the amount due as to receive any discounts and avoid making late payment
○File statement

Question 35

The receipt goes from the … to….

Answer 35

Seller to buyer

Question 36

Receipt

Answer 36

A written document signed by the seller of the goods stating they received payment from the buyer