P1 Identifying the Documents Used to Record Business Transactions
1. Issue of a Purchase Order
A purchase order (PO) is document issued by the buyer to the seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a purchase order to a supplier is a legal offer to buy products or services. If the seller agrees to selling to the buyer it forms a contract between the two.
It should include: * The order number, so it can be traced and matched with invoices and statements * The purchasers name and address which is usually across the middle of the document * The price * The name and address of the supplier * The catalogue/reference number *
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Pro Forma Invoice VAT It means for forms sake.
It is sent to a new customer, or an existing customer who has been late making a payment
It is sent to the buyer before the goods are delivered
The details are the same as on an ordinary invoice. The goods are delivered after the payment has been made.
When the goods are paid for a normal invoice is issued.
It sets out charges which have to be paid in advance.
Debit Note
This is issued by the seller and sent to the buyer.
It Is Essentially an Additional Invoice
It is used to correct errors e.g. if goods were invoiced at a lower price than it should been or if some goods were over charged.
4. Credit Note
A credit note is a document issued by a seller to a buyer. The seller usually issues a credit memo for the same or lower amount than the invoice, and then repays the money to the buyer or sets it off against a balance due from other transactions.
A credit note lists the products, quantities and agreed prices for products or services the seller provided the buyer, but the buyer returned or did not receive. It may be issued in the case of damaged goods, errors or allowances. In respect of the previously issued invoice, a Credit Memo will reduce or eliminate the amount the buyer has to pay.
Reasons for issuing a credit note: * To correct a mistake e.g. being over charged * Goods are
The ordering process begins with the decision of the customer to submit their order simply by either calling, faxing or mailing their order information. When a customer calls in their order, the customer service representatives takes down pertinent customer information, which includes the customer's name, billing and shipping address, product number and description, quantity and shipping instructions. While taking down the order, the customer service representative access the company's order entry system where inventory checks are conducted as well as credit checks are processed. In addition, delivery options are advised to the customer. Here the customer decides
All operations within an organisation must be viable through legislation. Legislation often constrains just how much information an organisation can have and the manner in which it can be used. Legislation exists to protect both employee and employer from unfair conduct. Legislation is a law which has been produced by the government. Legislation exists to authorise access to particular files, to sanction individuals who do not abide by guidelines set, to restrict how much information can be given, etc. For example, employees must have a formally written contract of employment prior to commencing work with a company. It protects employees against unfair dismissal and states that a redundancy pay must be paid if the
This control is directly related to the accuracy transaction-related audit objective for sales. The auditor might test the effectiveness of this control by examining a sample of duplicate sales invoices for the clerk’s initials indicating that the unit selling price was verified.
Sales invoices are prepared in batches on a daily basis using numbered sales invoices. Sales invoice numbers are automatically generated by the company’s computer system. The accounts receivable clerk does not have appropriate computer rights to override the computer-generated invoice number. Upon preparing sales invoices, the accounts receivable clerk verifies that the first invoice number of the batch is consistent with the last invoice number of the previous batch. Inconsistencies or skipped sales invoice numbers are investigated and resolved before new sales invoices are prepared. The items shipped are compared to the items billed for proper quantity, price, and other sales order terms.
This entity stores information about a payment that correlates directly from a client to a package being delivered.
document is that instead of trading for an item that you may desire, you would have to pay
All goods purchased pass through a receiving department under the direction of the chief purchasing agent. The duties of the receiving department are to unpack, count, and inspect the goods. The quantity received is compared with the quantity shown on the receiving department’s copy of the purchase order. If there is no discrepancy, the purchase order is stamped “OK—Receiving Dept.” and forwarded to the accounts payable section of the accounting
The entries used to record the disposition when the receivables are sold to a factor often detail the cash received plus the service charge. The company can then balance their receivables account. When a credit card company records a credit card
Notes receivable represent claims for which formal instruments of credit are issued as evidence of debt. A credit instrument
Tax invoice These are items that you are not responsible for – the assumption is that someone else will do them.
1. Noninterestbearing notes 2. Loss contingencies 3. Committed lines of credit 4. Accounts payable 5. Pledging arrangements __ Use accounts receivable as collateral.__ __ Often require compensating balance.__ __ Only formal credit instrument is the invoice.__ __ Effective interest higher than stated interest.__ Recorded if probable and amount is known or__ reasonably estimable.__
Require officers who have borrowed money from the company to repay the amounts owed at December 31. This would convert into cash the “notes receivable from officers,” which now appear in the balance sheet as noncurrent assets. The loans could be renewed immediately after year-end.
SAB 104 lays down the following conditions that should all be fulfilled to enable revenue recognition in cases on non-delivery of goods: (1) The risks of ownership need to have been transferred to the purchasers, (2) The customers have made commitments, preferably written, to procure the goods, (3) The purchasers call for the ‘bill and hold’ transactions, (4) The buyers should be
5.Payee to be a certain person: - Promissory note should specify the payee in clear terms i.e. by name, son of, and resident of, etc. The payment can also be identified by description.