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AAT (L2): FINAL Chapter Summary > Chapter 2: Financial Documents for sales > Flashcards

Chapter 2: Financial Documents for sales Flashcards

1
Q

When selling goods and services on credit, a business will deal with a number of documents. The most important are:

A
  • Purchase Order
  • Delivery note
  • Invoice
  • Credit Note
  • Statement
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2
Q

How does the seller request payment?

A

By means of an invoice

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3
Q

Who prepares the credit note?

A

The credit note is prepared by the seller.

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4
Q

How does the seller remind the buyer of payment due?

A

By regular statement of account (normally monthly)

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5
Q

Who is the credit note sent to?

A

The credit note is sent to the buyer.

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6
Q

Types of discounts available?

A

Trade
Bulk
(Deducted by seller from invoice total)

Settlement
(Deducted by buyer)

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7
Q

3 reasons of refund by a credit note?

A
  1. Damaged Goods. 2. Shortages 3. Buyer overcharged
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8
Q

How will a refund due to the buyer be acknowledged and documented?

A

By means of a credit note.

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9
Q

Credit note: Is the invoice number of the original consignment quoted?

A

The invoice number of the original consignment is quoted.

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10
Q

Coding: What types are documents ususally coded in?

A

Numeric / Alpha-numeric

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11
Q

Credit note: Where is the reason for issue quoted?

A

The reason for the issue of the credit note is stated at the bottom of the credit note

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12
Q

Why are documents ususally coded?

A

For reference purposes.

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13
Q

Credit note: Eg. Of reason for issue?

A

E.g. ‘Damaged’ notes

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14
Q

What do financial documents need to be done to, before sending out?

A

Authorised.

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15
Q

Credit note details: What are the details exactly the same as?

A

The details are otherwise exactly the same as on an invoice

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16
Q

How soon should any document discrepancies be dealt with?

A

Promptly.

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17
Q

Statement: Will a seller expect immediate payment for each individual invoice?

A

A seller will not normally expect a buyer to pay each individual invoice as soon as it is received.

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18
Q

How long are documents usually retained for?

A

At least 6 years.

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19
Q

Statement: What happens if the seller send invoices for every order?

A

The buyer could have to make multiple payments during the month.

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20
Q

Price Quotation?

A

Seller may be asked to provide.

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21
Q

Statement: What is sent to the seller at the month end?

A

A STATEMENT of account is sent from the buyer to the seller @ end of the month

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22
Q

Purchase order?

A

Seller receives from the buyer.

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23
Q

Statement: What does it show?

A

The statement shows what is owed B -> S

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24
Q

Delivery note?

A

Goes with goods from buyer to seller

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25
Q

Statement: How is it prepared?

A

This statement, which can by typed out / printed by the seller’s computer accounting program.

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26
Q

Invoice

A

Lists the goods & tells the buyer what is owed.

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27
Q

Returns Note?

A

Sent with goods being returned

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28
Q

Credit note

A

Sent to buyer to remind what is owed to the seller.

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29
Q

Price quotation?

A

Buyer finds out price via:

  • Catalogue
  • Written enquiry
  • Telephone
  • Website
30
Q

When does the seller usually provide written quotations?

A
  1. If requested to.

2. With higher value orders.

31
Q

When will a purchase order be made?

A

Once buyer has accepted the quoted price.

32
Q

How is the order processed?

A

Manually / On a computer accounting program.

33
Q

What is the reference number an example of in accounting?

A

Coding

34
Q

What is the reference number useful for?

A

Filing & Quoting on later documents

35
Q

Where is the reference # stated?

A

Product code column

36
Q

What is it a further example of?

A

Alpha-Numeric Coding

37
Q

Who is the purchase order signed & dated by?

A

The person in charge of purchasing

38
Q

What is unlikely to happen without the authorisation?

A
  • Supplier is unlikely to supply the goods

- Order will probably be returned

39
Q

When is the delivery note despatched?

A

It is despatched with the goods when the order is ready.

40
Q

Invoice: What is it?

A

Trading Document

States how much is owed by the buyer of goods/services.

41
Q

What addresses does the invoice show?

A

-Seller of goods
-Where invoice should be sent
-Where goods should be sent
(If different from invoice address)

42
Q

Why is the invoice date important?

A
  1. Payment date is calculated from it

2. Transaction date is used for VAT purposes.

43
Q

Net value?

A

The amount due to seller

After deduction of trade / bulk discount

Before VAT is added on.

44
Q

Goods total?

A

The amount due to seller

Is total of net column

45
Q

When is VAT calculated?

A

After deduction of any cash discount.

46
Q

What is VAT added to produce?

A

VAT is added to produce the invoice final total.

47
Q

How is total calculated?

A

VAT + Goods total.

It is the amount due to the seller.

48
Q

Carriage paid?

A

The price of the goods includes delivery

49
Q

E&OE

A

Errors & Omissions excepted.

If a mistake results in an incorrect final price

Supplier has right to rectify the mistake & demand the correct amount.

50
Q

Credit note?

A

Refund Document

Reduces the amount owed by the buyer

51
Q

3 egs of refund by credit note?

A
  1. Damaged Goods / lost in transit / faulty.
  2. Not all goods have been sent (shortages)
  3. Unit price on invoice is incorrect & buyer overcharged.
52
Q

What 3 details are on a credit note?

A
  1. The invoice no. of the original consignment is quoted.
  2. Reason for credit note issue is stated at the bottom.
  3. Details are otherwise exactly the same as on an invoice.
53
Q

Why is a statement of account sent from supplier to buyer at the end of the month?

A

To prevent the buyer from making multiple payments during the month.

And make one payment at the end of the month.

54
Q

Statement:

Balances b/f? Where does it appear?

A

Balances Brought Forward

These appear in the debit column with the wording “Balances b/f” in the details column.

55
Q

Statement details?

Credit Column

A

Balances owing at the beginning of the month.

Payments received from the buyer
(Credit Column)

Refunds made on credit notes including VAT
(Credit Column)

56
Q

Statement details?

Debit Column

A

Invoices issued for goods supplied
(Full amount due incl. VAT)
(DEBIT Column)

57
Q

Staement Details?

Box at Bottom

A

Running Balance

Final Net Total of all the items.

58
Q

Settlement Discount is also known as?

A

Cash Discount

59
Q

Trade discount: When is it normally issued?

A

It is common practice for suppliers to give businesses that normally order from them a trade discount is normally given.

60
Q

Trade discount: What is it?

A

A % reduction in the invoiced amount

61
Q

Trade discount: Why is it called that?

A

It applies to ‘businesses in the TRADE’ rather than the general public.

62
Q

Bulk Discount: When is it issued?

A

Bulk discount is given to buyers who purchase in large quantities.

63
Q

Invoice calculations

A
  1. Total Price before discount
  2. Trade discount
  3. Total Price - Trade discount
  4. VAT
  5. Total Invoice price.
64
Q

Settlement discount?

A

A further discount given when payment is made early

Eg. 2.5% settlement discount for payment within 7 days

65
Q

What is a credit note?

A

A credit note is a refund document

That reduces the amount owed by the buyer.

66
Q

Settlement discount?

A

A further discount given when payment is made early

Eg. 2.5% settlement discount for payment within 7 days

67
Q

What is a credit note?

A

A credit note is a refund document

That reduces the amount owed by the buyer.

68
Q

What type of FD is used when goods sold on credit.

To be sent with goods (S -> B) listing goods sent.

A

Delivery Note

69
Q

What type of FD is used when goods sold on credit.

To order goods in the first place

A

Purchase order

70
Q

Explain the term TRADE DISCOUNT

A

Trade Discount (TD) =

% Allowance

Given to customers

Who regularly deal with seller.

71
Q

Coding: Egs found on FDs?

A
  • Purchase Order No.
  • Delivery Note No.
  • Invoice No.

-Inventory Code
-Account No.
Credit Note No.

72
Q

Coding: Why is it important?

A

Cooding is important for accurate cross-referencing & for efficient filing.

AAT (L2): FINAL Chapter Summary (11 decks)

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