Question Answer
Buying on credit means… buy now, pay later
An individual’s or a business’ credit rating may be checked by: Looking up the Stubbs gazette, Contacting other business’ who have dealt with them
Treatment of orders by the seller Date-stamp the order, Get the products ready for delivery, Send order to the office for preparation of delivery docket and invoice, File a copy of the order
Treatment of incoming delivery dockets: Check it against incoming the order to make sure you are receiving what you ordered, File it away and check it against the invoice when it arrives
Treatment of outgoing delivery dockets: Check the name and address of buyer are correct, Check the details are as per order, File a copy, Ensure the docket is signed by the buyer when good are received
Treatment of outgoing invoices Compare prices with quote given, Check calculations for accuracy, Check address of customer, Write in Sales Day Book and post to debtors ledger, File a copy
Treatment of incoming invoices Compare with order and delivery docket, Check accuracy of prices and calculations, Write in Purchases Day book and post to creditors ledger, File a copy
Invoice This is a bill for the goods.
Credit Note Sent from seller to buyer if they have been overcharged or have received faulty goods
Treatment of outgoing credit note Check figures and dates for accuracy, Record in Sales Returns Day book, File a copy
Treatment of incoming credit note Record in Purchases Returns Day book
Statement of Account A document sent from the seller to the buyer at the end of a period of time, usually a month. It outline the transactions that took place between the seller and the buyer during that time
Treatment of outgoing Statements of Account Check all transactions are included and correct, Check the name and address of the buyer, File a copy
Treatment of incoming Statements of Account Compare with relevant documents, Compare with Creditors Ledger, Check all calculations, Pay seller amount due, File a copy
Receipt When the seller receives payment it is usual to issue the buyer this.
Treatment of outgoing receipts Check figures and dates for accuracy, Check the name and address are correct, Record in the Analysed Cash Book on debit side, Keep a copy
Procedure for dealing with complaints Listen to the complaint, Investigate the complaint, Take the necessary action, Reply to the complaint, File a record of the complaint
Effective Purchasing Involves…. Finding the best price, Making sure the goods will arrive on time, Making sure you order the correct amount. Not too much, and not too little, Choosing a reliable supplier and delivery company, Checking that goods delivered match the delivery docket
Why businesses sell on credit To increase sales an profits. To compete with businesses who only sell for cash. To facilitate customers who require tome to pay for goods purchased. E.g builders
Bad Debts Arise when the buyer does not pay the seller what they owe. They are written of as an expense by the seller
Terms and conditions An agreement sent by the seller to the buyer that shows the price of the goods and the terms and conditions of sales. Includes items such as: date of delivery, cost of delivery and discount for cash sales.
VAT Value Added Tax. Is a tax added on to the value of a good or service.
Cash discount an extra discount given to the buyer if they pay promptly within the state period of time.
Ex-works the buyer must pay for the transportation of the goods from the factory.
Cash with order (CWO) payment for the goods is required at the time of ordering the goods.
Cash on delivery Payment for the goods is required when the goods are delivered.
Trade discount A reduction the selling price given when the buyer and seller are in the same area of business. It is deducted before VAT is added to the price.
Carriage paid The seller will pay for the delivery of the goods to the buyer.
Errors and omissions excepted (E & EO) Is often added to business documents. It is used to say that a price list, product description or other document may contain mistakes or may not include some details. However, it has no legal force.
Delivery Docket Comes with the goods and is signed by the customer as proof of delivery
Order Form You fill this in with the details of the goods you want to buy
Quotation Sent to the buyer with details of the best prices they can offer, any discounts and the terms of sale.
VAT Value Added Tax.
Credit Note Issued by the seller if goods are returned or if they overcharged the customer.
Debit Note Issued by the seller if they undercharged the customer.
Invoice Shows what was delivered ;full details of cost and when it is to be paid.
Statement This is sent at the end of each month. It lists all the invoices and credit notes for the month.
Receipt Proof of payment for goods or services.
Credit Rating The buyers ability to pay for goods purchased. This shows whether the customer has a good record of paying on time.
Payment Paying for goods or services. This can be by cash, cheque, bank transfer, credit cards etc.
Bulk buying Buying goods in large quantities.
Effective purchasing Getting value for money by buying goods at the right price, quantity and quality.
Letter of enquiry Sent to potential suppliers to check the best deals they can offer.
Terms of Sale These can be payment terms, discount terms or transport terms.
Credit offered The customer received the goods but pays for them later.
Trade discount A reduction in price. The supplier may give this to other businesses, on goods that are obsolete or if they buy in bulk.
Carriage Transport costs/ Delivery costs.
F.O.R Free On Rail. Delivery is free to the nearest railway.
F.O.B Free On board. Delivery is free to the nearest port.
Unit Price The price per ONE product.