BUSINESS DOCUMENTATION
Importance of business (source) documents:
Enables a business to trade smoothly
Facilitate preparation of accounting records (books of original entry)
Helps in solving disputes between a buyer and a seller.
Prove of ownership of goods.
Evidence that a transaction has taken place and for future reference.
Both parties (buyer and seller) use the same documents. These documents are:
a) Purchases order- Buyer
b) Invoice- Seller
c) Credit note - Seller
d) Statement of account- Seller
e) Remittance advice- Buyer
f) Receipts - Seller
g) Petty cash voucher – Internal
a) PURCHASES ORDER
A purchases order is prepared by a buyer to order goods from a supplier.
It contains details of goods or services required, quantity required, delivery
date, authorized signature of a senior member of the company. Once accepted
by the supplier, it becomes a formal contract between the buyer and the seller.
Layout :
PURCHASE ORDER
Gramson’s Sports
School lane,
Lincoln,LNI IPP
Tel: 0131 874428 Order number :4355
Rivett Rugby & Football Club Date :6 April 2017
Jacks lane
Ipswich.
Please supply
Quantity Description Unit price £ Total £
20 Football shirts 12.00 240.00
20 Rugby shirts 8.00 160.00
400.00
Delivery required: Early May
C. Ventura
Purchasing manager
On receipt and acceptance of the order, the supplier sends the goods and an
invoice.
b) INVOICE
-It is a document prepared by the seller to his customers asking them to pay for
goods or services supplied to them on credit.
layout:
INVOICE
Rivett Rugby & Football club
Jacks lane, Ipswich
Tel 0161 229 9229
Gramson’s Sports Invoice number :3189
School Lane Date : 4 May 2017
Lincoln IPP
Quantity Description Unit price £ Total £
20 Football shirts 12.00 240.00
20 Rugby shirts 8.00 160.00
400.00
Trade discount 2% (8.00)
Net invoice amount 392.00
Terms : 7-14 days; 5%, 15-21days; 2 % and22- 30 days; none
-From the accounting records of a buyer, it is a purchases invoice and to the
seller, it is a sales/revenue invoice.
i) Purchases invoice- source document for purchases day book
-It is received from a supplier of goods.
-Details of the purchases invoice are entered in the purchases a day book.
ii) Sales/revenue invoice
-It is issued by a seller to credit customers.
-It is the source document for sales day book.
Trade discount (found in
The net invoice amount is recorded in the day books. Net invoice amount = List
price less trade discount.
Trade discount it is an allowance given for bulk buying (large volume purchases).
Purpose of a trade discount:
a) Encourage more buying
b) Create customer loyalty (repetitive buying)
c) To clear old inventory / stock.
Note:
-There is no double entry for trade discount i.e it is not recorded in the ledger
accounts.
c) CREDIT NOTE
A credit note is issued by the seller to correct an overcharge of the invoice
after goods are returned to the business by customers.
Goods may be returned due to reasons such as:
Faulty or damaged
Wrong colour , size, type, e.t.c
Subject to an overcharge on the invoice (extra goods)
Since the goods are returned it therefore means that the account is overcharged.
The credit note shows that the full invoice amount should not be paid.
Format:
CREDIT NOTE
Rivett Rugby & Football club
Jakes lane, Ipswich
Tel 0161 229 9229
Gramson’s Sports Credit note No.118
School Lane Date : 15 May 2017
Lincoln IPP
Quantity Description Unit price £ Total £
2 Football shirts 12.00 24.00
Trade Discount 2% (0.50)
23.50
Reason for credit: Faulty stitching.
i) Credit note issued.
-This is for revenue returns / returns inwards from credit customers/trade
receivables.
-They are entered in a sales returns day book.
ii) Credit note received.
-This is for the goods returned (purchases returns) to the credit suppliers.
-Recorded in the purchases returns book or returns outwards book.
d) STATEMENT OF ACCOUNT
-It is a document send by the seller to buyer showing all the transactions during
the month and amount due.
-It starts with the opening balance outstanding from the previous month then lists
the amounts owing from the current month’s invoices. Any amount paid and
credit notes are included (deducted). The amount outstanding (not paid) at the
end of the month is calculated.
-The customers should check the details of the statement against their own
records to confirm the balance then he arranges to pay the account.
-Format of statement of account.
STATEMENT
Rivett Rugby & Football club
Jacks Lane, Ipswich.
Tel 0161 229 9229
Gramson’s Sports Statement date:31 May 2017
School Lane Account No:C52
Lincoln Page No. 1
Date Reference Debit Credit Balance
£
May 4/2017 Invoice No 3189 392.00 392.00
May 15/2017 Credit note No 118 23.50 368.50
Total outstanding 368.50
Terms : 30 days from date of invoice
e) REMITTANCE ADVICE
-Is a note sent by a customer to accompany payments by cheque or via banker’s
Automated Clearing Services (BACS) and gives details of the payment. -Format of
remittance advice.
REMITTANCE ADVICE
Graham’s Sports
School Lane, Lincoln
Tel 0131 874428 VAT Reg:811 6571 56
Remittance Advice: 6/151
Date :26 June 2017
Rivett Rugby & Football club Account Number :C52
Jacks Lane
Ipswich
Date Invoice or credit note Invoice Credit Payment £
no note
04/05/2017 3189 392.00 392.00
14/05/2017 118 23.50 (23.50)
Total payment 368.50
e) RECEIPTS
It is a document prepared by the seller when he sells goods or provides services
on cash. The supplier issues it to his customers to acknowledge payment of goods
or services supplied to them.
Format
f) Petty Cash Voucher
It is a document prepared by the petty cashier when making payments for
expenses/claims involving small amount. The petty cash voucher must show
the date and details of the items purchased or expenditure incurred.
-Details of the petty cash voucher are entered in the petty cash book.
