Ch. 20- Managing Business Transactions (documents)

Question 1

DIFFERENT business documents

Answer 1

-Letter of Inquiry (b)
-Quotation (s)
-Order (b)

-Delivery docket (s)
-Invoice(s)

-Letter of complaint(b)
-Credit notes (s)

-Statement of account(S)
-Cheque
-Receipt

Question 2

General treatments for documents

Answer 2

File a copy
Check name and address are correct

(Use for all)

Question 3

Treatment: Letter of inquiry

Answer 3

Buyer:
()

Seller:
Send quotation back

Question 4

Letter of Inquiry

Answer 4

Sent by buyer
To fin information on product and service availability, prices and delivery options

Question 5

Quotation

Answer 5

Gives information about prices, delivery options, products,discounts and terms of sale. Eg free delivery

Question 6

Treatment: Quotation

Answer 6

Buyer:
-compare quotations for best deal
-Check terms of sale
-Compare again letter of enquiry

Seller:
()

Question 7

Order

Answer 7

Request from buyer to seller to send the goods and terms outlined in quotation

Question 8

Treatment: Order

Answer 8

Buyer:
()

Seller:
-check stock levels
-check credit rating

Question 9

Delivery Docket

Answer 9

Provides proof that goods were delivered and have them checked before signing docket.

Question 10

Treatment: Delivery Docket

Answer 10

Buyer:
-Check correct goods delivered

Seller:
-Check details according to the order

Question 11

Things you would find on a quotation:

Answer 11

-Telephone number
-Quotation number
-Name and address of buyer amd seller
-Description of goods
-VAT
-Trade discount

Question 12

Invoice

Answer 12

Sent by selller outlining quantity, prices, description of goods and any discounts.

Question 13

Treatment: Invoice

Answer 13

Buyer:
-Check calculations
-Check goods are correct as per order

Seller:
-Check calculations
-Check details are correct.

Question 14

Letter of complaint

Answer 14

Only sent by buyer if goods are incorrect, damaged and a replacement or discount are requested.

Question 15

Treatment: Letter of complaint

Answer 15

Buyer:
- Identify problem
-Check details are correct

Seller:
-Investigate problem
-Check details

Question 16

Credit Note

Answer 16

From seller to buyer, an alternative to cash.
Can order different goods from that company for same amount.

Question 17

Treatment: Credit note

Answer 17

Buyer:
-Check credit note price is same as amt. charged
-Check goods listed are goods returned

Seller:
- Check goods listed are goods returned

Question 18

Statement of Account

Answer 18

Seller to buyer at the end of month outlining money opened (Transactions + money owed)

Question 19

Treatment: statement of account

Answer 19

Buyer:
-Check calculations are correct

Seller:
-Check all transactions are on statement
-Check calculations

Question 20

Cheque

Answer 20

Payment from buyer to seller for goods purchased

Question 21

Treatment: Cheque

Answer 21

Buyer:
-Complete cheque correctly and counter foil (cross-check for safety)

Seller:
-Chcek details are correct
- Check it is signed

Question 22

Receipt

Answer 22

Proof of purchase

Question 23

Treatment: Receipt

Answer 23

Buyer:
-Check details correct

Seller:
-Complete receipt
-Check amount is correct

Question 24

Debit note and treatment

Answer 24

If amount on invoice is incorrect, seller will send a debit note showing correct amount.

Buyer and seller must both check calculations

Question 25

How to check creditworthiness?

Answer 25

-Ask for reference from bank -Ask to provide trade reference from other firms they have done business with -Look at customers accounts -Pay credit enquiry agency

Question 26

Why do companies sell on credit

Answer 26

-Encourages people to buy - increase profit - Match competitions who sell on credit - gives customers time to raise money to pay for goods

Question 27

How to reduce bad debts?

Answer 27

- Offer discounts to customers paying early -Stop selling on credit - only cash -Take out insurance eg. Bad debts -Send out invoices early so customers do not forget to pay

Question 28

How do bad debts affect a business

Answer 28

-reduces profits -can make business go bankrupt

Question 29

Mark up formula

Answer 29

Profit/cost price x 100

Question 30

Effective purchasing

Answer 30

-choose supplier with best deal

Question 31

Trade discount

Answer 31

Reduction in prices to encourage people to buy in bulk

Question 32

Stock control

Answer 32

System where you never have too much or too little - computerised stock system

Question 33

Stocktaking

Answer 33

Counting amt of stock in warehouse ata particular time

Question 34

DISADVS of too much stock

Answer 34

-can go out of date -Money tied up in stock ( not able to be used for anything else) - Insurance costs are higher - extra storage space

Question 35

DUSADVS of too little stock

Answer 35

-loss of sales - no stock to sell -Less profits -loss of regular customers to competitors

Question 36

Optimum level for stock

Answer 36

Best and most efficient level for the firm Not too high or low

Question 37

Factors to consider for stock level:

Answer 37

-Storage - do you have enough -costs- insurance higher when you have more stock -Level of consumer demand eg Christmas, summer -Type of stock - perishable or durable

Question 38

Stockout

Answer 38

Too little stock Loss of sales