business documents

Question 1

Business documents/documentation are important to a business for the following reasons:

Answer 1

Informs decision making.
 Tracks accountability.
 Demonstrates regulatory compliance.
 Provides a way to safeguard and retrieve information.
 Helps evaluate performance.

Question 2

Documents used in trade include:

Answer 2

Purchase Requisition – this is a request from the stock department to purchase goods in specific quantities.
2. Letter of enquiry – this is a letter of introduction from a prospective buyer requesting general information about goods, their availability, and the terms and conditions of sale.
3. Cover letter – this is a supplier’s response to a letter of enquiry. It highlights the goods and services that the supplier can provide and the terms and conditions of getting these goods to the customer.
4. Quotation – this is a detailed account of the price, discounts, term of delivery and the cost of supplying a specific quantity of a good.
5. An order – this is a request by a customer to be provided with some good or service for which the buyer is obligated to pay.

Question 3

Documents used in external trade include:

Answer 3

1. Bill of Lading – two features of a bill of lading include:
    This is a document used when goods are traded using sea transportation.
    It is a document of title for the importer, meaning he has the right to claim the goods when the
   shipment reaches its destination.
2. Airway Bill – two features of an airway bill include:
    This is a document used when goods are traded using air transportation.
    It is not a document of title, like a bill of lading.
3. Certificate of origin – this is a certificate of declaration, issued by the exporter in the country of origin, of the goods he is shipping. It is required to determine any preferential tariff rates which might apply.
4. Certificate if inspection – this is a health certificate and applies mainly to foodstuffs. The produce is certified to be in a consumable condition and free from contamination.
5. Shipping note – this note is submitted to the port of authority that receives goods for shipping. It tells the port authority what goods are being handed into their care and the ship they are to be loaded onto.
6. Import license – this is a document or permit giving permission for an individual to import particular goods. It limits or restricts the quantity or type of goods that will be allowed to enter the country.
7. Export license – this is a document or permit giving permission for an individual to export particular goods. It restricts goods leaving the country.

Question 4

Terms and concepts used in external trade:

Answer 4

FOB (Free on Board) – this means all expenses up to and including putting the goods on board the ship are included, but expenses of shipment, customs and dock dues at the destination port are excluded.
 CIF (Cost, Insurance and Freight) – this includes all costs and expenses to the port of destination.
 FAS (Free Alongside Ship) – the quoted price only includes expenses and delivery to the docks. Loading charges onto the ship are not included.
 C/PD – carriage paid.
 FOR (Free on Rail) – carriage will be paid, by the vendor, to the nearest railway station.

Answer 5

6. Proforma invoice – this is an invoice sent to a buyer when payment is required by the seller in advance. A proforma invoice may be sent for the following reasons:
    When goods are bought on consignment.
    When goods are sent through customs free of charge, the customs officer will have details of the valueof goods.
7. Invoice – this is a bill sent by the supplier to the buyer immediately after the goods have been dispatched.
   E.O.E. (Errors and Omissions Excepted) – is used in an attempt to reduce legal liability for incorrect or incomplete information supplied to a buyer on an invoice.
8. Credit Note – this is used to reduce the amount of the original invoice. A credit note may be sent for the following reasons:
    The buyer was overcharged.
    Goods were damaged in transit for which the seller is liable.
    Overpricing of goods.
9. Debit Note – this is used to add amounts to the original invoice. A debit note may be sent for the following
   reasons:
    The buyer was undercharged.
    The tax rate applied on the invoice was too low.
    The discount rate applied on the invoice was too high.
10. Statement – this is sent by the seller to the buyer showing details of transactions that occurred over a specified period.