2: Financial Documents for Sales

What 7 documents are used in the selling process?

1. Price Quotation

2. Purchase Order

3. Delivery Note

4. Invoice

5. Returns Note

6. Credit Note

7. Statement

What are the two types of discount?

1. Bulk Discount

2. Trade Discount

What is bulk discount?

A discount given by SELLERS to BUYERS who purchase in LARGE quantities.

What is trade discount?

An agreed discount that is GIVEN to businesses by suppliers.

What are the 5 steps for calculating TRADE DISCOUNT?

1. Total price before discount

2. Trade discount

3. Net price before VAT

4. VAT

5. Total invoice price

What is Prompt Payment Discount?

A discount offered by the SELLERS to the BUYERS to encourage the buyers to settle STRAIGHT AWAY.

What are the 2 ways of adjusting for VAT when PPD is deducted?

1. The seller issues a credit note.

2. The seller includes a PPD declaration on the invoice.

What is VAT?

A UK sales tax on the selling price charged to buyers.

When is VAT added?

It is added to the price of items sold after discount has been deducted.

What is credit limit?

The maximum amount which the seller will allow the customer to OWE at any ONE TIME.

What are the 8 checks that need to be made when checking an invoice?

1. Customer

2. Correct Place

3. Correct Goods

4. Quantity

5. Unit

6. Price

7. Correct Discount

8. Calculations

What calculations will need to be checked for an invoice with trade discount deducted?

Quantity X Unit Price = Total Before Discount

Total Before Discount X Discount% = Discount

Total Before Discount - Discount = Net Total

Net Total X VAT% = VAT

Net Total + VAT = Invoice Total

What are two examples of DISCREPANCIES on financial documents?

1. The discrepancy is found in the internal checking process, BEFORE the document is issued.

2. The buyer finds the discrepancy AFTER the document has been issued.

What are the 2 reasons that Coding is important?

1. An instant and accurate way of referencing CUSTOMERS, SUPPLIERS, INDIVIDUAL PRODUCTS, PURCHASE ORDERS.

2. It enables documents to be filed in an efficient way so they can be ACCESSED easily.

What are the 3 ways filing systems can be organised?

1. Alphabetically

2. Numeric

3. Alpha-numeric