Business Documentation

Invoices
An invoice is a request for payment relating to goods or services supplied on credit. Credit terms will be agreed between the seller and the buyer and the buyer should pay the invoice within the agreed period of time. A simple invoice is shown below: INVOICE No 3632 Asbury Park Amusements Asbury Park New Jersey Tel 693452 Date: 30 August 2010 To: Clemons Company Big Man West New Jersey Your order No. 253 Quanti ty 10 10 Description Slot machines Pinball tables Less 10% trade discount Total excluding tax Tax (15%) Total due Unit price 25 00 40 00 Total Amoun t 250 00 400 00 650 00 65 00 585 00 87 75 672 75 Activity 1 Using the unit prices shown in the above invoice and showing your workings calculate the total due if Clemons Company had ordered 15 Slot machines and 12 Pinball tables. As above he is entitled to a 10% trade discount and the goods will be subject to a 15% sales tax. Activity 2
1

The invoice contains an invoice number used for recording and reference purposes. It contains the name and address of the seller and buyer together with the buyers order number. The quantity of the goods supplied will be shown along with a description of the goods being sold. The unit price per item may be shown with the total amount for that item in the example shown each slot machine costs 25.00; the quantity ordered is 10 and so the total amount for this item is 250.00. Never just accept the amounts shown on an invoice you should always check them for accuracy. The net value of this order came to 650.00 but Clemons Company has been allowed a trade discount because they are also a trader this calculation is recorded on the invoice and is subtracted from the net amount to arrive at the total before any tax is added. In the UK VAT may be added at 20% but we will use a standard rate of 15% - the principles are the same. Tax is then added to arrive at the total amount due by the customer.

Using the unit prices shown in the above invoice and showing your workings calculate the total due if Clemons Company had ordered 18 Slot machines and 16 Pinball tables. As above he is entitled to a 10% trade discount and the goods will be subject to a 15% sales tax.

Credit notes
A credit note is sent by the seller to the buyer and offsets an amount against the original invoice. There are a number or reasons why a credit note is issued to offset an invoice; possibly some of the goods sent were damaged in transit, possibly a mistake was made on the original invoice and the buyer was overcharged or possibly not all of the goods were actually sent. The credit note makes sure that overall the correct amount is paid for the actual quantity of goods accepted by the buyer. A simple credit note is shown below: CREDIT NOTE No 101 Asbury Park Amusements Asbury Park New Jersey Tel 693452 Date: 02 September 2010 To: Clemons Company Big Man West New Jersey Re: Your order No: 253; our invoice No: 3632 1 slot machine and 2 pinball tables damaged in transit Quanti ty 1 2 Description Slot machine Pinball tables Less 10% trade discount Total excluding tax Tax (15%) Unit price 25 00 40 00 Total Amoun t 25 00 80 00 105 00 10 50 The credit note contains a credit note number used for recording and reference purposes. It contains the name and address of the seller and buyer together with the buyers order number and the original invoice number. The quantity of the goods to be offset will be shown along with a description of the goods and the reason for the credit The unit price per item may be shown with the total amount for that item in the example shown each pinball table costs 40.00; the quantity damaged is 2 and so the total amount for this item is 80.00. Never just accept the amounts shown on a credit note always check them for accuracy. The net value of this credit note came to 105.00 but Clemons Company had been allowed a trade discount on the original invoice and this is subtracted from the net amount to arrive at the total before any tax is added. In the UK VAT may be added at 20% but tax varies around the world. We will use a rate of 15% the principles are the same.

Total credit

94 50 14 18 108 68

Tax is then added to arrive at the total amount to be offset against the customer's original invoice.

Activity 3 Using the unit prices shown in the above invoice and your workings from activity 1 calculate the credit note due if Clemons Company returned 2 Slot machines and 1 Pinball table. As above he is entitled to a 10% trade discount and the goods will be subject to a 15% sales tax. Then calculate the net amount that Clemons Company should pay. Activity 4 Using the unit prices shown in the above invoice and your workings from activity calculate the total due if Clemons Company returned 3 Slot machines and 4 Pinball tables. As above he is entitled to a 10% trade discount and the goods will be subject to a 15% sales tax. Then calculate the net amount that Clemons Company should pay.

Statement of account
The statement of account is a record of transactions between the seller and the buyer. It is produced by the seller and will be sent out regularly by the seller to its customers. STATEMENT OF ACCOUNT Asbury Park Amusements Asbury Park New Jersey Tel 693452 Date: 2 September 2010 To: Clemons Company Big Man West New Jersey Our Reference No: CC01 Date Reference Debit p Credi t p Balan ce p The statement of account contains a reference number which allows Asbury Park Amusements to relate the statement for recording and reference purposes. It contains the name and address of the seller and buyer together with a summary of transactions over a given period of time. In the example shown, Clemons Company had an outstanding balance of 200.00 on August 16. When invoice number 3632 for 672.75 was sent to Clemons Company this amount was shown on the statement and added to the outstanding balance. Clemons

2008 16 Aug 30 Aug 01 Sep 02 Sep Am ount due Balance b/fwd Invoice 3632 Payment Credit note 101 200 00 672 75 150 00 108 68 200 00 872 75 722 75 613 95 613 95

Company now owed 872.75 On September 1 a payment was received from Clemons Company for 150.00 which reduced the outstanding balance to 722.75. When Asbury Park Amusements issued credit note number 101 for 108.68 this further reduced the outstanding balance Clemons Company owed to 613.95. Thus, at the end of the period Clemons Company owed Asbury Park Amusements 613.95.

Cheques
Cheques are a useful method of payment which can be used instead of cash. To be able to use a cheque you need to have a bank current account and then a cheque book will be issued to you. Date 30 Sep 2010 Payee Asbury Park Amusem ents

Bittan Bank plc

30 September 2010 Big Man West, New Jersey 75-85-75 Pay _Asbury Park Amusements______ ________________________or order Six hundred and thirteen pounds ninety five pence 613 - 95 For Clemons Company Clar ence Clemons 657599 75-85-75 69945888

Amount 613.95 657599

Payee the person to whom the cheque is payable 657599 the cheque number. Each cheque will have its own unique number 75-85-75 the bank sort code. These are unique to each bank and a particular branch 69945888 the account number. This tells the Bittan Bank plc, of Big Man West, New Jersey, which account to deduct the cheque payment from Pay this is the name or the company or person to whom the cheque will be paid Bittan Bank plc this is the name of the bank and the branch at which the account is held 30 September 2010 this is the date that the cheque was written The two vertical lines across the middle of the cheque show that the cheque is 'crossed' and can only be paid into the account of the person named as payee

When sending or receiving a cheque it is important to check them for accuracy. The words and figures on the cheque must agree; the cheque should be current and it should be signed. The name of the payee must be spelt correctly since it can only be paid into the account of the payee. A cheque is a very safe way of settling outstanding account balances. In the example above Clemons Company is paying the entire balance that they owe Asbury Park Amusements. Asbury Park Amusements will pay the cheque into their own bank account and providing sufficient funds are in Clemons Company's bank account, the money will be transferred electronically to Asbury Park Amusements. Use of the cheque as a payment method is however declining rapidly due to the growth in on-line and other electronic payment methods.

Cash requisition vouchers

Cash requisition voucher No:01 Date: 30 September 2010 Required for: Petty cash reimbursement Amount: 86-75. Signed: Clarence Clemons The cash requisition voucher is used when a business uses cash rather than a cheque to make a payment. In this instance cash is required to reimburse the petty cashbook float. There is a unique reference number per voucher which should be dated, detailed and signed for by the person requesting the cash.

Summary An invoice is a request for payment Credit terms are agreed between the buyer and the seller Trade discounts are allowed usually between two business 'in the same trade' or for bulk orders The trade discount is calculated before arriving at the sub-total to which tax is added A credit note reduces the amount owing against an earlier invoice A credit note is usually issued because goods are returned as unwanted, or broken, or the original invoice over-charged for the goods supplied A statement of account is a record of transactions between a supplier and its customer A cheque is a convenient and safe payment mechanism. A cash requisition voucher is used when business cash is required for expenditure All documents should be checked for accuracy