Selling Goods and Services Flashcards
what is a cash sale?
goods or services paid for immediately
how can a cash sale be made? (list five)
cheque
debit card
bank transfer
coins and notes
even credit card
how can a credit card be a form of cash sale?
because the bank pays immediately but the individual pays the bank at a later date
what three prices must be recorded in the business books for cash sales?
net price
VAT
gross price
what is a credit sale?
when goods and services are bought but payment is made later by the customer
why do businesses allow credit sales to other businesses?
this encourages the customer to make more purchases and then pay later as it helps with the individuals cash flow, this also helps the business if they are selling items on credit which allows them to also pay their supplier with better cash flow
how can a business ensure payment from credit customers?
by running a credit check to ensure the customer and agreeing on a payment which outlines how much a customer can owe at a time and when they should pay it off
which documents are involved in making in a sale? (list three)
customers need to be made aware of the price (catalogue/advertisement etc)
the same price must be listed on the invoice
some businesses may give a quotation or estimation regarding the service
what is a quotation?
this price cannot be changed once the customer has accepted it, there may be additional factors which may change the price
what is an estimation?
a rough idea based on guesswork of the job, this amount can be negotiable depending on circumstances
what is a purchase order?
a legal document once the order has been accepted by the supplier this creates and contract between both seller and buyer
larger businesses will need to issue purchase orders (customer orders) unlike smaller businesses with all the information surrounding the order
what does a purchase order include? (list 7) QUIPDAI
individual reference number
product code if available
quantity
description of the goods
unit price and total price (not necessary but useful for accuracy)
authorising signature and date
invoice and deliver address
what is a sales order, and what does it contribute towards in the business?
this can be raised from a purchase order by the seller which lists what the customer has bought, this can be kept to help with stock and when to purchase
what is an advice note?
this confirms that the seller has accepted the order and explains when the goods will be delivered if the delivery is not immediate or if they are on their way
what is a delivery note?
sent with the deliveries to the buyer who then determines if the goods are satisfactory and then will sign two forms
why are there two forms signed by the buyer when the items are delivered?
one retained by the buyer and passed onto the account and the other given back to the supplier as proof of delivery
what is an invoice?
the document that itemises the goods sent or services specifying the price, it is a legal document and can be used for recording tax so certain items must be specified
what is the threshold a company must reach which requires them to pay tax?
£85,000
what needs to be listed on the invoice? (15)
name and address of supplier
address of where the invoice is sent
address of where the goods are sent (if different)
invoice number
VAT registration (if the business is registered for VAT)
customer reference number (if they have one)
original purchase order number which helps link the invoice to the purchase
date of invoice (esp important to credit customers)
product code (if there is one)
precise description of goods and quantity
price for unit and total
discounts (if offered)
rate of VAT
total for the invoice plus the VAT charged
what are the three types of discounts?
bulk discount
trade discount
prompt payment discount
how are discounts calculated?
the percentage of the discount is taken off the net price and the VAT is taken off leaving the gross price
what is PPD?
prompt payment discount which encourages buyers to pay faster for a discount
what are the rules surrounding PPD?
a set percentage which can be applied within a set amount of time i.e. 2% if paid within 7 days
what is the main problem with PPD
that the supplier does not know if the discount has been taken unless they have received payment or until the time limit has passed
how can the prompt payment discount be given
once the invoice has been raised the supplier must record this as well as the discount applied, this can be done two ways, issue a credit note with the discounted amount + VAT or the original invoice must contain clear wording with how much the discount is and when it should be paid by and a statement that the customer can claim back the VAT they paid. If the customer does take the discount the supplier will record the amount paid, the amount of the discount taken, and they must also adjust the VAT
how should PPD be calculated off the net amount
a prompt payment discount is on top of any bulk or trade discount, so a bulk/trade discount will be shown as a reduction on the invoice and the PPD will be taken off the reduced amount
what should be done with faulty goods
they should be returned to the seller in a goods returned note and then the seller will will issue a credit note (refund document)
why is a credit note important for records
to show that the original invoice amount does not need to be paid in full
why should you retain the original invoice, even if the credit note means there is no use for it (list two reasons)
to show that the original invoice amount does not need to be paid in full, and second both companies would have recorded this invoice so crossing out an entry is not an option
how can we calculate the amount to be taken off from the original amount due to faulty goods
if two items were to be returned then you would
- calculate the total price before trade discount
2 x 75 (price/item) = 150
- calculate the trade discount
150 x 10%= 15
- calculate net price
150 - 15 = 135
- calculate VAT
135 x 20% = 27
- calculate credit note total
135 + 27 = 162
what will a credit note include (list four)
- number of original invoice
- the reason for return
- unique number, cn’s have their own sequence of numbers to not have the same details like an invoice.
statement of account
for a customer it shows all the transactions between customer and supplier, all the invoices, credit notes, discounts and and payments received all shown in one document, this can also be used as a payment
the statement may start with b/f, what does this mean
for customers that pay their invoices after a period of time so the amount will be ‘brought forward from the previous month, new invoices will be added to this as well as any discounts
what is the difference between credits and debits (for the customer)
any amounts that decrease what is owed are credits (on the right), and any amounts that increase the amount owed are called debits (on the left)
which discounts are listed on statements
only PPD’s they are stated once they have been taken and not when they are offered as the customer may not pay within the time allowed to qualify for the discount
which documents are included to track sales
- quotes and estimates
- purchase orders
- delivery notes
- invoices
- return notes
- credit notes
- customer statements
