Detailed Notes: Common Business Documents in Trade

Business documents are essential records that provide evidence of transactions between
buyers and sellers. They ensure clarity, track obligations, facilitate payments, and serve as
crucial input for accounting records. Here's a breakdown of common documents in the typical
order they might appear in a trading cycle:

1. Letter of Inquiry

• Purpose: A document sent by a potential buyer to a potential seller to request

information about goods or services. It's the starting point for gathering details before
potentially placing an order. The buyer might ask about product availability,
specifications, prices, delivery times, terms of sale, or request a catalogue.

• Real-Life Example (Dar es Salaam): "Mama Neema Catering Services," based in

Mikocheni, wants to source fresh fish in bulk for events. The manager writes a Letter of
Inquiry to "Mvuvi Fresh Supplies" at the Ferry Fish Market, asking for their price list for
different types of fish (like Red Snapper, Tuna, Prawns), minimum order quantities,
delivery options within Dar es Salaam, and payment terms.

• Importance: Initiates the sales process, helps buyers compare options from different
suppliers.

• Typical Structure:

o Your (Buyer's) Letterhead/Address: Name, address, contact details.

o Date: When the letter is written.

o Seller's Address: Name and address of the company being inquired.

o Salutation: E.g., "Dear Sales Manager," or specific name if known.

o Body:

▪ Introduction: Briefly state who you are and why you are writing.

▪ Specific Request: Clearly list the information needed (e.g., "Please

provide current prices for...", "Could you send us your latest catalogue?",
"What are your delivery charges to Mikocheni?").

▪ Optional: Mention potential order volume if relevant.

o Closing: E.g., "We look forward to your prompt response," "Thank you for your
assistance."

o Signature: Your name and title.

2. Quotation

• Purpose: A document sent by the seller to a potential buyer in response to an inquiry (or
sometimes proactively). It details the specific goods or services offered, their prices,
terms of sale (payment terms, delivery terms), and the validity period of the offer. It is a
formal offer to sell under specific conditions.
 • Real-Life Example: "Mvuvi Fresh Supplies" responds to Mama Neema Catering with a
formal Quotation. It lists Red Snapper at TZS 18,000/kg, Tuna at TZS 15,000/kg, Prawns
at TZS 35,000/kg (minimum order 10kg per type). It states prices are valid for 14 days,
delivery within Dar es Salaam is TZS 20,000 for orders under TZS 500,000 (free above),
and payment terms are "Cash on Delivery" or 7 days credit for approved customers.

• Importance: Provides the buyer with a firm offer to evaluate; forms the basis of a
potential order if accepted.

• Typical Structure:

o Seller's Letterhead/Address: Name, address, contact details, TIN number.

o Date: Date quotation is issued.

o Quotation Number: Unique reference number for tracking.

o Buyer's Address: Name and address of the potential customer.

o Subject: E.g., "Quotation for Fresh Fish Supplies".

o Body:

▪ Table/List: Item description, quantity (if applicable), unit price, total price
per item.

▪ Total Amount: Sum of all items.

▪ Terms and Conditions: Payment terms (e.g., COD, 30 days credit),

delivery details, warranty information (if any).

▪ Validity Period: How long the quoted prices are guaranteed (e.g., "Valid
until April 18, 2025").

o Seller's Authorized Signature/Stamp.

3. Delivery Note (DN) / Goods Received Note (GRN - Buyer's version)

• Purpose: A document accompanying a shipment of goods, sent by the seller to the

buyer. It lists the description and quantity of goods delivered. Its primary purpose is to
allow the buyer to check the delivered goods against the order and this note. The buyer
usually signs a copy as proof of receipt (Proof of Delivery - POD). Sometimes the buyer
prepares their own Goods Received Note (GRN) upon checking the delivery.

• Real-Life Example: "Mvuvi Fresh Supplies" delivers 15kg Red Snapper and 20kg Prawns
to Mama Neema Catering. The driver presents a Delivery Note listing these items. Mama
Neema's chef checks the quantities and quality, then signs and stamps the Delivery
Note copy for the driver. Mama Neema might also create their internal GRN referencing
the supplier's DN number.

• Importance: Confirms delivery of goods; provides evidence goods were received; allows
checking quantities before accepting the delivery.

• Typical Structure:

o Seller's Letterhead/Address.
 o Date of Delivery.

o Delivery Note Number: Unique reference.

o Buyer's Name and Delivery Address.

o Reference (Optional): Buyer's Purchase Order number (if applicable).

o Body: Table listing Item Description and Quantity Delivered (usually no prices).

o Space for Recipient: Name, Signature, Date, Company Stamp (Proof of Delivery
section).

o Driver/Delivery Person Details (Optional).

4. Invoice

• Purpose: A formal request for payment issued by the seller to the buyer after goods have
been delivered or services rendered. It details the products/services provided,
quantities, agreed prices, total amount due, payment terms, and often references the
Delivery Note or Purchase Order. It is a key document for the buyer's accounts payable
and the seller's accounts receivable.

• Real-Life Example: Following the delivery, "Mvuvi Fresh Supplies" sends an Invoice to
Mama Neema Catering. It references the Delivery Note number and lists: 15kg Red
Snapper @ TZS 18,000/kg = TZS 270,000; 20kg Prawns @ TZS 35,000/kg = TZS 700,000.
Total Amount Due: TZS 970,000. Payment Terms: Due within 7 days. It includes Mvuvi
Fresh's bank details and TIN number.

• Importance: Official bill for goods/services; triggers the payment process; essential for
accounting records (recording sales revenue and accounts receivable/payable).

• Typical Structure:

o Seller's Letterhead/Address/TIN Number.

o Word "INVOICE" prominently displayed.

o Invoice Number: Unique reference.

o Invoice Date.

o Buyer's Name and Address.

o Reference (Optional): PO Number, DN Number.

o Body: Table listing Item Description, Quantity, Unit Price, Total Price per item.

o Subtotal: Sum before tax.

o VAT (if applicable): Value Added Tax amount (e.g., 18% in Tanzania).

o Total Amount Due: The final amount the buyer needs to pay.

o Payment Terms: Due date, accepted payment methods, bank details.

o E-Receipt/E-Invoice details (if using TRA's VFD system in Tanzania).

5. Credit Note

• Purpose: A document issued by the seller to the buyer, reducing the amount the buyer
owes from a previous invoice. It's issued for various reasons, such as: goods returned by
the buyer (due to damage, incorrect items), overcharges on the original invoice, or
agreed allowances/discounts after the invoice was issued. It essentially cancels out part
or all of an invoice amount.

• Real-Life Example: Mama Neema Catering finds that 1kg of the delivered prawns were
spoiled. They inform Mvuvi Fresh Supplies, who agree to the issue. Mvuvi Fresh Supplies
issues a Credit Note to Mama Neema for 1kg Prawns @ TZS 35,000. This reduces the
amount Mama Neema owes from the original TZS 970,000 invoice.

• Importance: Corrects billing errors; officially documents reductions in amounts owed;

essential for adjusting accounts receivable/payable.

• Typical Structure:

o Seller's Letterhead/Address/TIN Number.

o Word "CREDIT NOTE" prominently displayed.

o Credit Note Number: Unique reference.

o Date.

o Buyer's Name and Address.

o Reference: Original Invoice Number being credited.

o Body: Details of the reason for the credit (e.g., "Return of spoiled goods"), item
description, quantity, unit price, total credit amount.

o VAT adjustment (if applicable).

o Total Credit Amount.

6. Debit Note

• Purpose: Can be used in a few ways, but commonly:

o Buyer to Seller: A buyer might issue a Debit Note to a seller to formally request a
Credit Note, especially when returning goods or claiming an allowance before
the seller issues the Credit Note. It signifies the buyer's intention to debit the
seller's account in their own books.

o Seller to Buyer: Less common, but a seller might issue a Debit Note to correct an
undercharge on a previous invoice.

• Real-Life Example (Buyer to Seller): Before receiving the Credit Note, Mama Neema
Catering could send a Debit Note to Mvuvi Fresh Supplies stating they are debiting
Mvuvi's account in their books by TZS 35,000 due to the return of 1kg spoiled prawns,
referencing the original invoice. This prompts Mvuvi Fresh to issue the official Credit
Note.
 • Importance: Formal notification of a discrepancy or return (often from buyer); request
for adjustment.

• Typical Structure:

o Issuer's Letterhead/Address (Buyer or Seller).

o Word "DEBIT NOTE" prominently displayed.

o Debit Note Number: Unique reference.

o Date.

o Recipient's Name and Address (Seller or Buyer).

o Reference: Original Invoice Number.

o Body: Reason for the debit (e.g., "Return of goods", "Correction of undercharge"),
item details, quantity, price, total debit amount.

o Total Debit Amount.

7. Statement of Account

• Purpose: A summary document issued periodically (usually monthly) by the seller to the
buyer. It lists all transactions (invoices, credit notes, payments) that occurred between
the two parties during that period and shows the outstanding balance owed by the
buyer. It's not a demand for payment itself (like an invoice) but a summary to help
reconcile accounts.

• Real-Life Example: At the end of April 2025, "Mvuvi Fresh Supplies" sends a Statement of
Account to Mama Neema Catering. It shows: Opening Balance (maybe zero), Invoice
#123 (TZS 970,000), Credit Note #45 (TZS -35,000), Payment Received (if any), and the
Closing Balance owed by Mama Neema.

• Importance: Helps both buyer and seller reconcile their records; reminds the buyer of
the total outstanding amount.

• Typical Structure:

o Seller's Letterhead/Address.

o Word "STATEMENT OF ACCOUNT" prominently displayed.

o Statement Date.

o Account Period: (e.g., "For the month ending April 30, 2025").

o Buyer's Name and Address.

o Body: Table listing:

▪ Date of each transaction.

▪ Reference Number (Invoice No., Credit Note No., Receipt No.).

▪ Transaction Type (Invoice, Credit Note, Payment).

 ▪ Debit Amount (Increases amount owed - Invoices).

▪ Credit Amount (Decreases amount owed - Payments, Credit Notes).

▪ Running Balance.

o Opening Balance (from previous statement).

o Closing Balance (Total amount outstanding).

o Optional: Ageing analysis (how long amounts have been outstanding).

8. Cheque / Payment Evidence

• Purpose: The method or document used by the buyer to settle the amount owed to the
seller.

• Types & Examples:

o Cheque: A written order instructing a bank to pay a specific sum from the
drawer's account to the payee (seller). Example: Mama Neema Catering writes a
company cheque payable to "Mvuvi Fresh Supplies" for the outstanding balance.

▪ Structure: Payee Name, Amount in words, Amount in figures, Date,

Drawer's Signature, Cheque Number, Bank/Branch details, Account
Number.

o Electronic Funds Transfer (EFT) / Bank Transfer: Direct transfer from the buyer's
bank account to the seller's bank account. Proof is usually a bank transfer
confirmation slip or digital notification. Example: Mama Neema uses their online
banking portal (e.g., CRDB's SimBanking or NMB Klik) to transfer the payment
directly to Mvuvi Fresh's bank account, saving the transaction confirmation.

o Mobile Money (e.g., M-Pesa, Tigo Pesa, Airtel Money): Increasingly used,
especially for smaller B2B amounts or sole traders. Proof is the SMS
confirmation message. Example: For a smaller supplier, Mama Neema might pay
via Tigo Pesa, using the confirmation message as proof.

• Importance: Settles the debt; provides proof of payment attempt (cheque) or

completion (EFT/Mobile Money confirmation, bank statement).

9. Receipt

• Purpose: A document issued by the seller to the buyer confirming that a payment has
been received. It serves as the buyer's proof of payment. Especially important for cash
transactions but also issued for cheque or electronic payments. In Tanzania, businesses
registered for VAT using VFDs (Virtual Fiscal Devices) issue electronic fiscal receipts.

• Real-Life Example: After Mama Neema's payment (via bank transfer) reflects in Mvuvi
Fresh Supplies' account, Mvuvi issues an official Receipt (potentially an EFD receipt)
acknowledging the amount received, referencing the invoice(s) paid. Mama Neema
keeps this receipt as proof the invoice is settled.

• Importance: Confirms payment received; completes the transaction cycle for that
specific invoice; essential proof of payment for the buyer.
 • Typical Structure:

o Seller's Letterhead/Address/TIN Number.

o Word "RECEIPT" prominently displayed.

o Receipt Number: Unique reference.

o Date Payment Received.

o Received From: Buyer's Name.

o Amount Received: In figures and words.

o Payment Method: (e.g., Cash, Cheque No., Bank Transfer Ref).

o For Payment Of: Reference to Invoice number(s) being paid.

o Seller's Authorized Signature/Stamp.

o EFD Receipt Details (if applicable in Tanzania): Verification code, QR code, etc.

Understanding these documents, their purpose, and their flow is crucial for efficient business
operations, accurate accounting, and maintaining good relationships between buyers and
sellers.