Form 3 Commerce

Documents used in home trade

 • - letter of inquiry
Documen
• -price list/ catalogue/ quotation
ts used in • -order note
home • - pro- forma invoice
trade in • -advice note
• -delivery note/ consignment note
their
• -invoice/ debit note / credit note
correct • -statement of account
sequence • -receipt
:
Letter of inquiry
SENT BY THE BUYER TO THE SELLER
ASKING FOR
 :
• Availability of
goods .
• Terms of payment .
• Terms of delivery .
• Prices and sizes of
the goods.
• Whether or not
discounts are
offered.
• Whether credit is
offered.
Why does the buyer send letters
of inquiry to several suppliers?
• So that the buyer can compare prices and which supplier
is offering favourable terms.
In reply the supplier will send
either a
• Quotation /price list or catalogue
• Quotation gives
• Terms of delivery.
• Detailed description of the goods.
• Terms of payment.
• Any discounts on offered.
• Prices of the goods.
 Why does a quotation give a
time limit which it be accepted.
• This is to protect the seller against sudden rises in costs
that would affect the price given in the quotation.
 Instead of a quotation some
seller might send a price list.
• This has a list of all products offered by the seller with
prices of each product.
• It therefore advertises other products not written in the
letter of inquiry.
• It gives terms of payment/ credit/ discounts and delivery.
• Price lists are cheap to produce.
 Some sellers might issue a
catalogue instead of a quotation
or price list.
A catalogue
• Shows pictures of all goods on offer.
• Unit prices of the goods
• The product code which is used when ordering the goods.
 Advantages of catalogue

• It serves as a means of advertising.

• It gives an accurate description of the goods
 Disadvantages of catalogue
• Catalogue are very expensive to produce especially if
prices of goods are changing constantly.
 Order note
• This sent by the buyer after deciding to buy the goods
• It states the goods that are required.
• The prices agreed. Click to add text
• The place of delivery.
• The date on which the goods are required.
• Terms of payment and delivery.
 Advice note

• Once the seller is satisfied with the credit worthiness of

the buyer an advice note is sent.
• It informs the buyer that the goods have been sent.
• It helps the buyer to spot any mistakes which can be
corrected.
• It also helps the buyer to prepare the warehousing before
the goods arrive.
 Delivery note
• This is used when the seller uses his own transport to
deliver the goods
• It accompanies the goods and is signed by the buyer as
proof that the goods have been delivered
• It contains name and address of supplier.
• Name and address of the buyer.
• Address for delivery.
• Description and quantity of the goods being delivered.
• Prices are not shown on this document.
 Consignment Note
• This is used when goods are being delivered using a hired transport like swift.
• It is completed in triplicate by the transport firm.
• A copy is given to the seller and another copy the buyer and the third one is retained by the transporter.
• The copies are signed by the receiver of the goods.
• It is a contract of carriage between the transporter and the supplier.
• It contains (i) the names and address supplier (consigner) and the buyer (consigned).
• (ii) .Address or place of delivery.
• (iii) .Quantity and description of the goods.
• (iv) .Condition of goods.
• (v) .Freight charges
• (vi) .Name of hired transporter
• (vii) .The obligations of the three parties involved.
 Invoice
• Is issued to the buyer by the seller once the goods have been delivered and it’s a request for payment.
• It is an account rendered by the supplier goods are sold on credit.
• It shows a description of the goods supplied.
• Their unit price and total price.
• Terms of payment.
• Addresses of buyer and seller.
• Shows the amount the buyer owes the supplier.
• It enables traders to use the document for bookkeeping purposes.
• At the bottom of the invoice it is written, E and OE which stands for, Errors and Omissions Expected .
• If mistakes have been made on the invoice then the statement E and OE allows the supplier to correct
such mistakes afterwards.
 Debit Note
• Is issued by the supplier to the buyer to correct
undercharge on the invoice
• It is a supplementary invoice.
• It is a request for the buyer to top up payment for goods
already delivered.
• It increases the amount owing on the original invoice or
receipt.
 Credit note
• It is sent by the supplier to the buyer to correct an overcharge arising from any of the
following:
• (i) Arithmetical errors.
• (ii) Overstated invoice.
• (iii) Return of empty crates or bottles.
• (iv) Return of damaged goods.
• (v) Return of sub-standard goods.
• (vi) Return of goods that were wrongly sent to the buyer.
• (vii) Adjusting a shorts supply of goods.
• It reduces the amount owing on the original invoice.
• It is usually printed in red.
 Statement of account

• It gives a summary of transactions during the month.

• It is a request for payment.
• It shows the amount owed by the customer.
• It shows the balance from previous month.
• It allows checking of accuracy of entries.
• It may be used to raise queries.
• It shows terms of payment.
 Receipt
• Is issued by the seller to the buyer as proof of payment.
• It is useful to the buyer for record purposes.
• It used for redress when fault goods are returned to the
supplier.
• The seller gives the customer an original receipt and remains
with a carbon copy.
• Test One (25 marks)
• 1a State and explain 4 factors that are considered before
choosing a mode of transport (8)
• b. Give 4 advantages and 4 disadvantages of own fleet
operations (8)
• c. State 3 advantages and 3 disadvantages of road
transport (6)
• d. Define the term containerisation (3).
• Homework 4
• Giving 2 reasons in each case state the most suitable
mode of
• transport to carry:
• (i) Beef from Harare to London (3)
• (ii) Bread from a bakery to nearby shops (3)
• (iii) 5000 tonnes of cement from Gwanda to Mutare (3)
• (iv) Water from a dam to a residential area (3)
•