Business Documents

Question 1

Importance of business documents

Answer 1

Business documents provide a record of a
business’ transactions with other businesses
and custom

Question 2

Buying on credit

Answer 2

A creditor is a person or business to whom a business or individual owes
money. They have bought goods from a business and received them straight away -
however they do not pay for the goods until later (usually 30 days later). It allows them to ‘buy now & pay later’.

Question 3

Benefits of buying on credit

Answer 3

1. Allows people to buy now and pay later
2. Helps with the cash flow of the business - they can pay for goods when they
   can
3. Encourages good relationships between buyers and sellers
4. Helps to increase sales for a business
5. Discounts can be offered to encourage people to pay on time

Question 4

Risks of selling on credit

Answer 4

1. Some people may not pay for the goods on time
2. Some people may never pay for the goods - this is considered a loss for the
   business (bad debt)
3. If a customer does not pay on time, it can damage their reputation and they
   may not be offered credit in the future
4. It can affect the relationship between buyer and seller if payment is not
   made on time
5. It can be expensive for a business to follow up on debtors (people who owe
   them money)

Question 5

How to check the credit worthiness of a individual/ business

Answer 5

1. Ask customer to supply a reference from other firms that they have already
   bought goods on credit from
2. Ask customers to supply a credit reference from their bank
3. Check customers credit history with the Irish Credit Bureau.

Question 6

Letter of inquiry

Answer 6

A letter (or email) of enquiry is sent by the buyer to the
seller asking about particular items and their terms of
sale. Terms of sale are the conditions attached to the sale of
a product.

Question 7

Quotation

Answer 7

● A quotation is a written document that is
sent by a seller to a potential buyer and
shows the price of the goods and any
terms of sale.

Question 8

Order

Answer 8

An order is a written document sent
by a buyer to a seller requesting the
supply of the quantity of goods listed

Question 9

Invoice

Answer 9

The invoice is a document sent by the seller to the buyer with the goods or shortly after the delivery of them. It gives details of the quantity, price of the goods being sent, terms of sale and details about carriage

Question 10

Delivery note

Answer 10

The delivery note is a document sent
by the seller to the buyer that lists the
items being delivered

Question 11

Credit note

Answer 11

A credit note is a document that is sent by the seller to the buyer to decrease the amount owed by them. It is issued when goods that have been purchased on credit are returned to the seller and it would not be appropriate to provide a cash refund

Question 12

Debit note

Answer 12

A debit note is sent by the seller to the buyer
and will increase the amount owed by them. It is used when there has been an
undercharge on an account.

Question 13

Statement of account

Answer 13

A statement of account is sent by the seller to the buyer and is a summary of all the transactions between the two firms over a particular period of time. It shows the full amount owed and will act as a request for any payment still owed at the end of the month.

Question 14

Receipt

Answer 14

A receipt is a written document stating that
the goods have been paid for. It is signed by the seller and given to the
buyer

Question 15

Delivery

Answer 15

If the quotation says ‘Carriage paid, the seller of the goods will cover the cost of delivering the goods to the buyer. Otherwise, they will give a cost for postage or a courier

Question 16

E&OE

Answer 16

This stands for errors and omissions excepted. This means that the business will not be held responsible if an error has been made and can alter the price in the case that it has.

Question 17

Price held

Answer 17

prices quoted might be valid for only a limited time. This encourages the customer to order quickly

Question 18

Trade discount

Answer 18

This is a reduction of the selling price given to business customers. It is subtracted before the VAT is added on.

Question 19

Cash discount

Answer 19

An extra discount may be given if the goods are paid for in a shit period of time. For example, cash discount 5% for fourteen days. Sellers offer this extra incentive to encourage quick payment by buyers.

Question 20

VAT

Answer 20

This is a tax on goods and services. It must be charged on each transaction in the channel of distribution.

Question 21

CWO ( cash with order)

Answer 21

Payment must be made when the order is placed for the goods

Question 22

COD (cash on delivery)

Answer 22

Payment for the goods must be made when they are delivered.

Question 23

Payment terms

Answer 23

This is where details of the credit and payment terms are given, e.g. a buyer may have up to thirty days to pay for the goods