chapter1- Business Documents

Question 1

What is a cash sales/purchase transaction?

Answer 1

retail environment process

e.g paying for an item upfront and receiving a receipt

Question 2

What is a credit sales/purchase transaction?

Answer 2

receiving the item and having a period of time to pay

Question 3

What is the procedure to go through when offering credit? (existing and new customer)

Answer 3

Existing Customer: carry out routinely credit checks so that their limit isnt exceeded
New Customer: will have to fill out form so a credit check can be done on them

Question 4

What are the 5 steps to the accounting system?

Answer 4

Business Transaction 
Business Document
Book Of Prime Entry
Ledger Accounts
Trial Balance

Question 5

What is the process of Business Documents for a Credit Transaction

Answer 5

Seller: price quotation
Customer: purchases the order
Seller: send goods and delivery note
Seller: sends sales invoice
Customer: pays

Question 6

What is the process for a quotation to purchasing the order?

Answer 6

Customer: Price Enquiry- through email,telephone,letter
Seller: Price Quotation- through website,email, telephone, letter
Seller: quotation must - match price
are the delivery terms acceptabl
are any discounts applicable?

Question 7

What 5 things must be included in a Sales Order?

Answer 7

the product/service
quantity
date of supply
delivery address
price + payment
(any discounts given)

Question 8

When should a sales invoice be created and what 5 things must it include?

Answer 8

After goods have been delivered
Must include: inv/document number
                       price, discounts
                       vat
                       date
                       address

Question 9

What is the definition of VAT?

Answer 9

a consumption tax added to a product’s selling price

Question 10

What are the most common rates of VAT?

Answer 10

5% rated
20% rated
Exempt

Question 11

What is a trade discount?

Answer 11

set amount deducted from the price of the goods to loyal customers

Question 12

What is a bulk discount?

Answer 12

amount deducted from goods due to the order being above a certain quantity

Question 13

What is a prompt payment discount?

Answer 13

offered to customers to encourage them to pay invoices early/on time

Question 14

What is the difference between a purchase and sales invoice?

Answer 14

Perspective
Sales Invoice: sellers pov
Purchase Invoice: customers pov

Question 15

How do you calculate VAT if you have the Net Amount?

Answer 15

Divide by 5

Question 16

How do you calculate VAT if you have the total amount (inc VAT)?

Answer 16

Divide by 6

standard rate

Question 17

What is a Credit Note?

Answer 17

document issued from seller to cancel part or all of the sales invoice