Chapter 6 - Process Documents from Suppliers

Question 1

What is the main concern of a business when it SELLS goods and services?

Answer 1

It provides what it has ordered and that it gets paid on time.

Question 2

What 2 concerns are what a business should consider when ORDERING goods and services?

Answer 2

• The correct good and services are provided - ON TIME

- They are CHARGED at the right PRICE

Question 3

What is Electronic Data Interchange (EDI)?

Answer 3

A method of connecting businesses online so that purchase orders and invoices can be ELECTRONICALLY GENERATED and payments can be made ELECTRONICALLY when due.

Question 4

What are the 4 documents used for purchases?

Answer 4

• Purchase Order
• Delivery Note
• Goods Received Note
• Purchase Invoice

Question 5

What checks and controls MUST be made when a business purchases goods?

Answer 5

• The correct goods have been received in an ACCEPTABLE condition.
• The correct terms such as DISCOUNTS and PRICE have been applied.
• The goods are paid for ONCE only (Paying TWICE does occur!)

Question 6

When is a purchase order usually issued?

Answer 6

When the price of the product has been obtained or agreed.

Question 7

What is a delivery note?

Answer 7

A note ACCOMPANIED when the goods ordered are despatched by the SELLER.

Question 8

What are the 5 main features of a delivery note?

Answer 8

1. ) Numerical Reference - Makes it easier to file and reference later
2. ) Method of Delivery is stated
3. ) The delivery note quotes the purchase order number, which enables the buyer to ‘tie up’ the delivery with the original purchase order.
4. ) It quotes the QUANTITY supplied, the goods’ DESCRIPTION, but NOT the price
5. ) It will be SIGNED and DATED by the person receiving the goods as proof of delivery.

Question 9

What is a goods received note (Delivery Note)?

Answer 9

An internal document that the buyers records the receipt of the goods and the details set in the delivery/advice note sent by the SUPPLIER onto it.

Question 10

What are the 4 main features of a Goods Received Note?

Answer 10

• The name of the supplier
• The quantity and details of the goods ordered
• The purchase order number
• The name of the carrier and any carrier reference number

Question 11

What 2 separate procedures are carried out in the Accounts Department when in the checking process?

Answer 11

• Checking the documents e.g. INVOICES, DELIVERY NOTES and COPY and PURCHASE ORDER - With each other.
• Checking the calculations on the invoice

Question 12

How do you check the GRN/Delivery Note?

Answer 12

When the goods are received, they should be checked against the delivery note. The QUANTITES must be counted, along with the condition of the goods. Any discrepancies or damages should be NOTIFIED immediately to the SUPPLIER so that REPLACEMENTS can be sent.

Question 13

How do you check the delivery note and purchase order?

Answer 13

The delivery note should be checked against a COPY of the purchase order.

• Supplier Catalogue Number, Quantity, Specifications, PO Reference Number.

Question 14

How do you check a invoice, delivery note and purchase order?

Answer 14

The invoice should be checked against the DELIVERY NOTE, and purchase order.

Invoice and Delivery Note
- Has the correct price been charged?

Invoice and Purchase Order
- Are the details of the goods on the invoice and delivery note the same?

Question 15

What 4 things must be checked when checking the calculations on the invoice?

Answer 15

1. ) Quantity vs Unit Price
2. ) Trade or Bulk Discount
3. ) Prompt Payment Discount
4. ) VAT

Question 16

How do you check the credit note when returning goods?

Answer 16

A purchaser will return faulty goods or claim PPD which is due. In that case, the purchaser will REQUEST a CREDIT NOTE from the SELLER to reduce the amount owed.

Question 17

When comparing the credit note and goods received note, what are the 3 details that can be checked?

Answer 17

• The identity of the goods returned
• The Quantity Returned
• The Purchase Order Reference Number

Question 18

How do you check the credit note?

Answer 18

When the credit note is received by the purchaser, it is CHECKED carefully to ensure goods’ QUANTITY, PRICE, DISCOUNT and VAT are calculated CORRECTLY.

That is checked against the GOODS RECEIVED and GOODS RETURNS NOTE.

Question 19

Why are invoices and credit notes coded?

Answer 19

They can be entered into the accounting system quickly and easily.

Question 20

What are the 2 different sets of codes?

Answer 20

1. ) Supplier Account Code - Identifies the supplier of the goods or services. This may be through ALPHABETIC OR ALPHANUMERIC code.
2. ) General Ledger Account- DEBITED in the accounting system, relates to the purchases or expenses paid.

Question 21

When keeping accounts lists, what 2 sets of code will it be for?

Answer 21

1. ) Supplier Accounts

2. ) General Ledger Accounts e.g. categories of purchases