Types of business transactions and documentation

Question 1

Define a business

Answer 1

A business is defined as an organization which exists for the purpose of making a profit.

Question 2

What is a Cash transaction

Answer 2

this happens when the buyer pays cash to the seller at the time the service or goods are transferred.

Question 3

What is a Credit transaction

Answer 3

this happens when payment is differed and the good are recived

Question 4

Scenario: Lauren wants to install a new A/C unit for the office.
List the correct documentations involved

Answer 4

1. letter of inquiry
2. quotation
3. letter accepting the quotation/ sales order
4. acknowledgement
5. delivery note
6. sales invoice
7. credit note ( if they are buying on credit )
8. cheque requisition
9. cheque
10. receipts

Question 5

Define invoice

Answer 5

an invoice is a document issued by the seller providing details of the goods or service provided which also is a demand for payment

Question 6

Characteristics of an invoice

Answer 6

1. name address of Seller
2. name address of Buyer
3. invoice number
4. Date of transaction
5. description of product
6. Quantity and unit price
7. Total amount of invoice including Tax
8. Tax point
9. Delivery address
   10.reference
   Due Date and other terms of sale

Question 7

FOB

Answer 7

Free on Board- this means that the supplier pays all carriage costs but the customer pays any subsequent carriage costs.

Question 8

EX Work

Answer 8

Price includes delivery cost

Question 9

E & OE

Answer 9

Errors and Omissions excepted - the supplier reserves the right to make any changes to the details as shown on the invoice.

Question 10

What are the Three types of Invoices

Answer 10

1. Receipts ( a transaction is settled immediately in cash)
2. COD ( an invoice sent by the seller with the goods and payment is done immediately)
3. Credit Invoice ( payment is due at a later time)

Question 11

Define Credit Note

Answer 11

a document issued by the seller to the purchaser to cancel all or part of a previously sent issue

Question 12

Define Debit Note

Answer 12

this is issued by the customer as a formal request for a credit note

Question 13

Define Per Forma Invoice

Answer 13

this is the invoice used for a perspective customer (much like a quotation)

Question 14

Devine a trade discount

Answer 14

a reduction in the cost of goods usually results from buying in bulk

Question 15

Define Cash Discount

Answer 15

a reduction in the amount payable to the supplier in return for immediate or early payment