Introduction to Bookkeeping (ITBK) 1 Flashcards
Terminology, documents and day books
Quotation
If there is no set price list that has been issued for customers to refer to, a business may issue a formal quotation upon request.
Purchase order
A purchase order is a buyer generated document that authorises a purchase transaction.
Sales order
To avoid misunderstandings, a business will normally confirm a customer’s order by completing a sales order.
A sales order is a seller generated document that authorises a sale to a customer, issued after the receipt of a purchase order.
Delivery note
A delivery note is a document accompanying goods despatched to a customer explaining what the delivery contains.
Goods received note
A goods received note is an internal document completed by the purchaser that records the details of goods received and contains similar information to a delivery note.
Invoice
A sales invoice can be simply defined as the request for payment by the purchaser for goods sold or services provided by the seller.
Receiving an invoice
When the invoice is received by the customer, the following checks should be performed:
That the invoice agrees to the delivery note to confirm that you are only invoiced for the goods received
That the prices charged agrees to the price list or your initial quote received
That the calculations for VAT and discounts (if applicable) are correct
That the payment terms and due date are correct (as per the credit agreement)
Goods returned note
When a customer returns goods, the return of goods will often be accompanied by a goods returned note.
A goods returned note is a document sent to the supplier by the customer detailing the goods returned and reason(s) for the return being made.
Codes - examples
A ledger code is a unique reference given to different types of income, expenses, assets and liabilities. It may also be referred to as a general ledger (GL) or nominal code.
A customer account code is a unique reference given to each individual customer of an organisation.
A supplier account code is a unique reference given to each individual supplier of an organisation.
Types of code
Alphabetical consists of letters.
Numerical consists of numbers.
Alphanumerical consists of letters and numbers.
Sales day book
The sales day book is a list of the credit sales invoices that are to be processed for a given period (e.g. a week).
Purchases day book
The purchases day book is a list of the credit purchase invoices that are to be processed for a given period (e.g. a week).
Cash book
The cash book is made up of cash receipts and cash payments i.e. any amounts received or paid out of the bank.
Discounts allowed day book
Used to record the discounts that have not been deducted at the point of the invoice being recorded in the sales day book but instead were offered on a conditional basis i.e. prompt payment discounts allowed to credit customers.
Discounts received day book
Used to record the discounts that have not been deducted at the point of the invoice being recorded in the purchases day book but instead were offered on a conditional basis i.e. prompt payment discounts received from credit suppliers.
