Financial Documents for Sales

Question 1

List the flow of documents in a sales transaction.

Answer 1

Price quotation - purchase order - delivery note + invoice - returns note - credit note - statement/payment

Question 2

What is the purpose of a price quotation?

Answer 2

It is an official inquiry into the price of an item.

Question 3

Name 4 parts of a purchase order?

Answer 3

Reference number
Catalogue number
Quantity of goods
Description of goods
Price
Signed and dated

Question 4

When is the delivery note dispatched?

Answer 4

With the goods, it is then signed on receipt.

Question 5

Name 4 parts of a delivery note.

Answer 5

Numerical reference
Method of delivery
Purchase order number and other details
Signed and dated by the recipient

Question 6

What is the purpose of an invoice?

Answer 6

It is a trading document which specifies how much is owed to the supplier by the customer.

Question 7

Whose addresses does the invoice show?

Answer 7

The sellers address
The address that the goods should be sent to
The address that the invoice should be sent to

Question 8

Name 3 examples of coding on an invoice?

Answer 8

The invoice reference number
The customer account number given to them b y the business
The original reference number on the purchase order
The product code

Question 9

What does the goods total show?

Answer 9

The amount due to the seller (before VAT)

Question 10

What does the net show?

Answer 10

The amount due to the seller after trade discounts are applied, and before VAT is added on.

Question 11

Name 3 terms of payment on an invoice.

Answer 11

Net monthly - must be paid within 28 days
Carriage paid - the total price includes delivery
E & OE - Errors and emissions accepted (the seller has the right to change the invoice if there is a mistake on the invoice)

Question 12

What does E & OE stand for?

Answer 12

E & OE - Errors and emissions accepted (the seller has the right to change the invoice if there is a mistake on the invoice)

Question 13

What is a credit note?

Answer 13

A credit note is a refund document which reduces the amount owed by the buyer which has not yet been paid.

Question 14

What does balance b/f mean and where would you see this term used?

Answer 14

Balance brought forward, and at the start of a statement to show the amount owed at the start of the month.

Question 15

List the 5 steps of calculating an invoice.

Answer 15

Calculate total price before discount (quantity X price)
Calculate the trade discount ((total/100) X discount)
Calculate the net price before VAT (total - discount)
Calculate the VAT ((net/100) X 20)
Calculate the total invoice price (net + VAT)

Question 16

How do you calculate settlement discount on an invoice?

Answer 16

Calculate total price before discount (quantity X price)
Calculate the trade discount ((total/100) X discount)
Calculate the net price before VAT (total - discount)

NOW calculate the settlement discount ((net/100) X settlement discount)
Calculate the reduced net but DONT WRITE ON INVOICE! (net - settlement discount)

Calculate the VAT on this lower amount ((updated net/100) X 20)
Calculate the total invoice price USING SETTLEMENT AMOUNT VAT (net + VAT)

Question 17

What is the meaning of ‘VAT exclusive’?

Answer 17

VAT exclusive is the total amount before VAT is added.

Question 18

What is the meaning of ‘VAT content’

Answer 18

VAT content is the amount of a total which is VAT.

Question 19

How do you calculate VAT content?

Answer 19

Goods total/6

Question 20

How do you calculate VAT exclusive?

Answer 20

Total X 0.8

Question 21

What is VAT?

Answer 21

VAT is a UK sales tax, paid by the consumer, collected by HMRC.

Question 22

What is the credit limit?

Answer 22

The credit limit is the maximum amount that a customer can owe to the seller to the seller at one time.

Question 23

What checks should be made on the invoice, name as many as possible.

Answer 23

Is the correct customer being invoiced?
Are the goods and invoice at the correct place?
Are the correct goods being sent?
Are the product details correct?
Are the calculations correct?

Question 24

What happens if a discrepancy is found before the document is issued?

Answer 24

It is handed back to the person who made the mistake for a new issue to be made.

Question 25

Name 2 reasons that coding is used in accounting.

Answer 25

Instant and accurate way of referencing customers and documents.
It enables documents to be filed in an efficient way.

Question 26

How long should accounting records be kept for?

Answer 26

Every business should have a file retention policy of 6 years to adhere to legal requirements.