Chapter 7: Prepare payments to suppliers

Question 1

When is a business ordering goods ready to settle up the supplier’s account in the purchases ledger?

Answer 1

When it has checked all the financial documents:

• Invoice
• Delivery Note
• Credit Note

Question 2

What is a common practice for a supplier to send each customer?

Answer 2

Sending a statement of account to each customer

Listing all the transactions
(Sales, Returns, Payments)

Which will then be recorded in the Purchases Ledger Account.

Question 3

Reconcilliation?

Answer 3

The process where the customer checks that the items on the supplier’s statement of account.

“Tie Up”

With the items in the supplier’s account in the purchases ledger.

Question 4

What must be done with any discrepancies between the supplier’s statement of account and the purchases ledger?

Answer 4

They must be identified and investigated.

They will affect the amount of money that will be paid to the supplier.

Question 5

How is payment of the buyer’s account made?

Answer 5

The amount is calculated by totaling authorised invoices due for payment

& deducting any authorised credit notes & discrepancies that have been found.

Question 6

How is payment on the due date advised to the supplier?

Answer 6

By completing and sending a remittance advice.

Either with a cheque, or with details of a BACS payment made direct to the bank account of the supplier.