Business documents for a credit transaction

Question 1

What does a typical credit transaction look like ?

Answer 1

1. The seller gives the customer a price quotation
2. The customer gives the seller a purchase order
3. The seller gives the customer the sales order
4. The seller gives the customer the delivery note plus goods
5. The seller gives the customer the sales invoice to the customer
6. The seller gives the customer a credit note
7. The customer gives the payment to the seller

Question 2

What does a typical price quotation contain?

Answer 2

• Name , address and contact details of the business quoting the price
• Name and address of the customer
• Todays date
• Details of the goods
• Authorisation signature
• Price being quoted

Question 3

What are the three types of discount ?

Answer 3

1. Trade discount
2. Bulk discount
3. Prompt payment discount

Question 4

What is the definition of a trade discount ?

Answer 4

A trade discount is a definite amount that is deducted from the list price of the goods for the supplies to some customers, with the intention of encouraging and rewarding customer loyalty.

Question 5

What is the definition of a bulk discount ?

Answer 5

A bulk discount is similar to a trade discount in that it is deducted from the list price of the goods and disclosed on the invoice. However, a bulk discount is given by a supplier for sales orders above a certain quantity.

Question 6

What is the definition of a prompt payment discount ?

Answer 6

Prompt payment discounts (also known as settlement or cash discounts) are offered to customers in order to encourage early payment of invoices.

Question 7

What is the definition of a purchase order ?

Answer 7

A buyer-generated document that authorises a purchase transaction.

Question 8

What does a typical purchase order contain?

Answer 8

1. Name and address of business placing the order
2. Order date
3. Sequential order number
4. VAT registration number of business placing the order
5. Name and address of business the order is being placed with
6. Authorisation signature

Question 9

What does a typical sales order contain ?

Answer 9

1. Name and address of business making the sale
2. Delivery address and date
3. Sales order number
4. Name and address of customer
5. Details of goods
6. Price of goods
7. Authorisation signature

Question 10

What is the definition of sales order ?

Answer 10

A seller-generated document that authorises a sale to a customer,issued after the receipt of a purchase order.

Question 11

What does a typical delivery note contain ?

Answer 11

1. Name and address of business making the sale
2. Delivery address and date
3. Sales order number
4. Name and address of customer
5. Details of goods

Question 12

What is the definition of a delivery note ?

Answer 12

A document accompanying goods despatched to a customer explaining what the delivery contains.

Question 13

Who is a delivery note given to?

Answer 13

1. One kept by the customer in order to compare to the purchase order and then to the sales invoice.
2. One signed by the customer and returned to the supplier of the goods as evidence that the goods have been received by the customer in good condition.
3. One signed by the customer and kept by the delivery organisation, such as a courier, as evidence that they have delivered the goods and that the customer has received them.

Question 14

What is the definition of a goods received note ?

Answer 14

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.

Question 15

What does a typical goods received note contain ?

Answer 15

1. An internal document produced by the customer
2. Date of receipt of good
3. Sequential GRN number
4. Supplier
5. Authorisation signatures
6. Confirmation of satisfactory receipt of goods or of issues with the condition of goods or quantity received.
7. Details of delivery provider

Question 16

What does a typical sales invoice contain ?

Answer 16

• Price
• Discounts
• VAT
• Sequential order number

Question 17

What is the definition of a sales invoice ?

Answer 17

A sales invoice is a document that itemises a transaction between a
buyer and a seller, it is a request for the buyer to make payment for
goods sold or services provided by the seller.

Question 18

What is the definition of a VAT ?

Answer 18

VAT (sales tax) is a consumption tax added to a product’s selling price. It represents a tax on the ‘value added’ to the product at each stage of a production or supply process.

Question 19

What is the definition of a input tax ?

Answer 19

Input tax is the tax paid on the purchase of goods and services.

Question 20

What is the definition of a output tax ?

Answer 20

Output tax is the tax charged on the sale of goods and services.

Question 21

input and output tax on a taxable person

Question 22

What goods and services are exempt from VAT ?

Answer 22

• certain land and buildings, where sold, leased or hired
• insurance
• Post Office postal services
• admission charges to museums, art galleries etc.
• betting, gaming and lotteries.

Question 23

What examples are there of zero-rated VAT supplies ?

Answer 23

• water and most types of foodstuffs (i.e. not hot food and not food
  eaten in a restaurant/café, as service is also provided which is
  taxable)
• books and newspapers
• drugs and medicines
• children’s clothing and footwear.

Question 24

What items have non deductible VAT

Answer 24

• Motor cars
• Business entertaining

Question 25

What is a taxable person?

Answer 25

A taxable person is any individual , partnership company , ect who intends to make taxable supplies and is liable to register. A person is liable to register f the taxable supplies exceeds a specified amount in a 12 month period .