1
Q
Describe the flow of documents
A
C ➡️ purchase order ➡️ S
⬇️
C ⬅️ delivery note ⬅️ S
⬇️
C (internal document used by business) good received not S
⬇️
C ⬅️ invoice ⬅️ S
⬇️
C ⬅️ credit note (if goods returned) ⬅️ S
⬇️
C ➡️ cheque or other form of payment ➡️ S
C ↔️ Remittance advice/ receipt ⬅️ S
(Internal document)
⬇️
C ⬅️ Statement of account ⬅️ S
2
Q
Why are financial documents important
A
- They are proof of a payment/ order
- May be used for legal reasons, e.g. as a part of a contract
- Used to produce financial statements, e.g. Profit and loss account and balance sheet, which show how well a business is performing
- They help a business monitor money flowing in and out of business
3
Q
Profit and loss account
A
Show the revenues and costs of a business for a given amount of time, usually a year
4
Q
Financial records
A
Show transactions that take place in a day to day basis
5
Q
Balance sheets
A
Show a business’ financial positions- it is a snapshot of the business at a particular point in time
6
Q
Bank and bank accounts
A
- All businesses have bank accounts
- Sole traders are sensible to keep their business and personal account separate
- Bank accounts located at particular branches allowing cash deposits and withdraws
7
Q
Bank services to a business
A
- Accepting payments into account
- Processing withdrawals from account
- Keeping transaction records + maintaining up to date payments
- Providing regular bank statements
- Allowing overdrafts and loans (by arrangement)
- Advice for business start ups/ expansions
8
Q
Name the payments methods
A
- Cheque
- Cash
- Credit card
- Debit card
- Credit transfer/ direct debit
9
Q
Cash payments for customers
A
- Easy and straightforward
- Must obtain cash first from ban or ATM
- Carrying large amounts is risky
- If receipt lost, no proof of postage
10
Q
Cash payments for business
A
- Payment is definite: no problem with fraud
- Storing large amount of chase, risky
- Transporting cash to bank, risky
11
Q
Cheque payment for the customer
A
- No need to carry cash and can be sent by post, security
2. No receipt required
12
Q
Cheque payment for the business
A
- Must be take to bank branch
13
Q
Cheque payment for both
A
- Transfer for money takes a few days
2. Cheque guarantee card ensures payment
14
Q
What is a debit card
A
- Debit, issued by bank
2. Debit cards are an alternative to chequers and cash- money is transferred immediately
15
Q
What is a credit card
A
- Credit cards issued by credit card companies- MasterCard + Visa are best known types
- Credit cards allow customer to pay later- interest is charged if amount is not our in full when statement is received
16
Q
Credit cards + debit cards for the customer
A
- Easy + convenient
- Ideal for ‘at a distance’ purchases
- Monthly statement issued, interest paid if balance not our in full
17
Q
Credit cards + debit cards for the business
A
- Money transfer automatic
- Swipe system recognises stolen/ invalid cards
- Business pay for service
- Corporate cards can be used by certain staff
18
Q
Debit card payments for the customer
A
- Simple + straightforward
2. Money transferred automatically/ quickly
19
Q
Debit card payments for the business
A
- Swipe system checks transaction valid, payment the guaranteed
- Same terminals used as for credit cards
- Handling charges cheaper than for credit cards
- Less primes to fraudulent use
20
Q
Direct credit and direct debit
A
- Both systems allow automatic tenders of money from one account to another
- Both are operated by BCAS- Bank Automated Clearing System
- Direct credit often called credit transfer- money is transferred to the individual
- Direct debt is the mirror - image - money transferred from the individual
21
Q
Purchase order
A
A legal document used but a business to place an order it gives detail about:
- what the customer wants to order
- when it was ordered
- who ordered it, + quantities involved
22
Q
How can ICT effect purchase orders
A
ICT can help to mistake proof, unique fields to make more efficient, it’s faster, saving time, saving money
23
Q
Delivery note
A
A business document that provides information when a product is delivered to a customer
24
Q
Cash receipt
A
Not given to show payment has been made by cash
25
Good received not
Lists items that have been brought into the business
26
Remittance advice
Summary of the account with a slip or advice note for payment
27
Sales invoice
Gives details of how much needs to be paid for goods
28
Statement of account
Summarises everything, including how much is owed
29
How do businesses use Good received notes
1. THIS US AN INTERNAL DOCUMENT!
2. GENERATED BY THE CUSTOMER
3. Received by the customer - usually big companies
4. Internally ➡️ accounts department
5. Delivery note + purchase order + good received note = are matched and send to accounts document
6. Can generate credit note is good is received damaged
7. Allows larger organisations identify the problems
8. When a credit note is raised it usually mean poor quality and mistakes
30
What are the benefits of using a delivery note
1. Provides information when a product is delivered to a customer
2. Trams your goods
3. Record
31
What must an invoice show
Invoices must show all the necessary information that is needed by a business to make sure goods or services age paid for. This includes
1. The date
2. Who the customer is
3. Detail laid the goods or services
4. Other reference information, including the amount owed, the length of time to lay and how to pay and how to pay
32
What do invoices need to be
1. Invoices also need to be accurate and complete.
2. Unless they are filled out correctly.
3. A customer may not understand how to pay or what they are paying for
4. Late payments cost time and money
5. Remittance advice can be attached on an invoice
33
How does a credit note effect a customer
Gives a customer the right to purchase replacement goods from the business it is effectively a credit in the customer account
34
What is a credit note an indication of
Credit notes are an indication of poor performance/ service. At some point someone somewhere in the organisation
35
What is tech credit and a debut on a statement of account
1. A debit in a statement of account is money that needs to be paid by the customer- money owned
2. Credit is the money that has been back into the account as credit for goods returned or damaged
3. -record + proof
36
What are remittance advice slips use for
Remittance advice slips are used by customers to send payment by post
37
Accounts
- at one time all accounting systems were paper-based very time-consuming
- more and more businesses are now moving to computerised accounts systems – faster and efficient
38
Computer systems in businesses
1. Businesses are not reliant on computers to help organise and run their organisation – linked via the Internet
2. Documents are now automated – speeding this up
3. For example purchase orders can be made online, delivery notes and invoices can be emailed
4. Statement of accounts no longer need to be made, can now be viewed directly online
5. Also means orders can go directly from the customer to business system, saving time and money
39
Give an example of a business run entirely on a computerised system
Amazon
40
Cost benefit
What the cost of something is to business and what benefit to the business for example if the cost of a computerised accounting system is more than the benefit, it is not worth putting the system into place
41
Revenue
Income coming into the business from sales, through the grant, the leasing of premises or interest on money in the bank
42
Costs
Any payments that are made from a business, for example telephone bills or the manufacture of products to sell
43
Give an example of revenue
1. Buying cakes from the bakery is sales a.k.a. sells revenue
2. Grants may come from the government for example if want people to buy solar panels for the population for the population to benefit from
44
How do customers benefit from ICT in a business
1. Using ICT means that customers pay for product in advance more often
45
How do businesses use ICT
1. Allows business to become very responsible to customer needs
2. Businesses can hold less sock and respond to what the customer wants giving them a bespoke service
3. Barcodes, not only do they make things efficient at the till, they also let the business automatically know when items are getting low so they know when to order new stock
46
Profit/ loss account
Shows a business financial performance measures by its cost and revenues over a period of time, usually a year
47
Balance sheet
Shows a business' financial performance at a point in time
48
Profitability ratio
Work out the level of profit compared to the amount of sales that have been made
49
Gross profit margin
A way of working out how much profit a business has made compared to the sales they have made
50
How do we found gross profit margin
Gross profit margin x 100/turnover
51
Net profit margin
Works out the amount of profit after expenses and calculates how much has been made compared to turnover
52
How do we find the net profit margin
Net profit x 100/turnover
53
Return on capital employed (ROCE)
Shows the return in the amount of capital invested
54
How do we find the ROCE
net profit x 100/capital employment
55
Liquidity ratios
1. Work out how easily a business it's able to pay its expenses
2. Are worked our using information from the balance sheet
56
Sales turnover
Aka total sales. The sales that the business has made specific time period. This is worked out by multiplying the number of goods by the price
57
Cost of sales
The actual cost of producing goods or making services available tags were sold
58
How do we find the cost of goods
Opening stock + purchase - closing stock
59
How do we find gross profit
Sales turnover - cost of goods sold
60
Expenses
The cost that the business must pay in order for it to track e.g. Ga electricity, rent, pay or any other costs that need to be paid by business
61
How do we find the net profit
Gross profit - expenses
62
Net profit
The amount of money made by business after paying all of its bills
63
Fixed assets
Those things which are continuous use by the business, such as buildings, machinery, equipment
64
Current assets
1. Like fixed assets, are also owned by the business but unlike fixed assets they could be easily turned into cash (and include cash) such as stock.
2. Stock represents future sales and so can be turned into cash relatively quickly.
3. Also include people who owe the business money for good for services; these money for goods or individuals are known as debtors
65
Current liabilities
Are debts that must be paid within one year
66
Long term liabilities
Debts needed to be paid over a number of years
67
Debtors
Are businesses or people who owe a business money
68
Creditors
Are business or people a business owes money to
69
How do we find out the working capital
Current assets - current liabilities
70
Working capital
Used in the day to day running of a business
71
Capital
Is the money used to start up a business
| Both can be used for investments
Business
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