Chapter 5- Process Payments from Customers

Question 1

what financial documents are included in a sales transaction made on credit?

Answer 1

• invoice
• credit note
• customer statement

Question 2

what does the invoice set out?

Answer 2

• the date
• the sales price and any discount given and VAT added
• the total due
• the date when payment is required

Question 3

what does the credit note do?

Answer 3

• this is used if any refund is due because of a faulty item etc and can be deducted from the amount owed to the seller

Question 4

what does the customer statement do?

Answer 4

• sets out all the invoices and credit notes issued
• sets out any payments received over a set period
• results in the final amount due

Question 5

what is remittance advice?

Answer 5

• an advice received from a customer telling the seller that a payment has been made

Question 6

how can remittance advice be delivered?

Answer 6

• posted, faxed, emailed

- it states that a certain amount of money has been sent by a credit customer in settlement of account

Question 7

what is remittance advice used for?

Answer 7

• to advise the sending of a payment direct to a sellers bank account
• to accompany a cheque

Question 8

what is BACS payment?

Answer 8

• Bankers Automate Clearing Services (an electronic bank transfer system which makes payment direct from one bank account to another)- often used for bulk payments

Question 9

what is faster payment?

Answer 9

• an electronic bank transfer system which makes payment direct from one bank account to another (often used for individual payments)

Question 10

what is a cheque?

Answer 10

• an order to a bank to pay a stated amount from the drawer’s account, written on a specially printed form

Question 11

what checks need to be made on the remittance advice for faster payments?

Answer 11

• needs to be checked against sales documentation and sales ledger account of the customer paying

Question 12

why do the checks need to be made on the advice for faster payments?

Answer 12

• to make sure there’s no errors or discrepancies

- makes sure the right amount has been sent for the right transactions

Question 13

what checks need to be made on the remittance advice for cheques?

Answer 13

• its in writing and signed by the person/organisation paying the money
• details are accurate and correct
• name after ‘pay’ is correct
• the cheque is in date
• the amounts in words & figures are the same

Question 14

why do the checks need to be made on the advice for cheques?

Answer 14

• ensures the cheque can be an acceptable payment method

Question 15

when can discrepancies occur on remittance advice?

Answer 15

• if there’s an underpayment
• if there’s an over-payment
• if the buyer has made a mistake deducting PPD

Question 16

what is an underpayment?

Answer 16

• not enough money has been sent to the seller

Question 17

what is an overpayment?

Answer 17

• too much money has been sent to the seller

Question 18

what is prompt payment discount?

Answer 18

• an early payment discount, where a seller allows a customer to deduct a percentage discount from the invoice total if payment is made within a specific time