Chapter 8 - Prepare Payments to Suppliers

Question 1

What are the 5 financial documents that are dealt with when a business makes a purchase of goods on credit?

Answer 1

1. ) Purchase Order
2. ) Delivery Note
3. ) Goods Received Note
4. ) Purchase Invoice
5. ) Purchase Credit Note

Question 2

What are the other 2 financial documents dealt with in this chapter?

Answer 2

• The receipt of the supplier’s STATEMENT OF ACCOUNT, which sets out what is owed.

Checked with SUPPLIER’S account in BUYER’S PURCHASES LEDGER

• The preparation of a REMITTANCE ADVICE by the BUYER, which advises the SUPPLIER that payment is made.

Question 3

What are the 3 documents involved in checking all the purchases documentation to identify and deal with discrepancies?

Answer 3

• The DELIVERY NOTE and the ACTUAL GOODS RECEIVED
• The SUPPLIER INVOICES and CREDIT NOTES for calculation errors
• The SUPPLIER INVOICES and credit notes against the PURCHASE ORDER

Question 4

Where may there be discrepancies before payment can be made?

Answer 4

Between the SUPPLIER’S STATEMENT OF ACCOUNT and the supplier’s account kept in the BUYER’S PURCHASES LEDGER

Question 5

What are the 4 examples of discrepancies?

Answer 5

• An invoice or credit note which appears on the supplier’s statement, but for the WRONG amount
• An invoice or credit note is on the supplier’s statement and is NOT in the BUYER’s PURCHASES LEDGER
• An invoice or credit note is in the buyer’s purchases ledger and NOT on the SUPPLIER’S STATEMENT
• An invoice or credit note which appears TWICE on the supplier’s statement

Question 6

What are the 2 principles when a method is used by a buyer for sorting out the payment of the account?

Answer 6

• Invoices should be paid by the due date, which can be calculated from the terms of the invoice
• Invoices should be CHECKED and AUTHORISED before the payment date

Question 7

What happens to invoices that have been checked?

Answer 7

They are passed to the person in the ACCOUNTS DEPARTMENT who deals with making payments to SUPPLIERS.

Question 8

What happens to an invoice when it is checked and found to be correct?

Answer 8

The person carrying out the check will MARK the document and AUTHORISE it for payment.

Question 9

What are the 2 forms that authorisation can take?

Answer 9

• The checker can initial and date the invoice, and tick it or write ‘PAY’ as an authorisation
• The organisation may have a special rubber stamp which can be used, this provides space for coding e.g. the COST CODE.

Question 10

What does are the 2 things invoice authorisation helps the organisation with?

Answer 10

• The checker’s initials will be there in case of any future query on the invoice e.g. undetected error.
• The invoice will be in the system for payment on the due date

Question 11

What is a disputed invoice?

Answer 11

When a buyer decides that an invoice on a statement should NOT be paid. The invoice may be DISPUTED with the supplier and the business may claim that the goods supplied are INCORRECT.

Question 12

What are the 2 forms a remittance advice usually takes?

Answer 12

• A list of all the items which make up the payment

- Notification of the total amount