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Questions and Answers
Which document is sent by a supplier to a customer regarding goods returned or overpayments made by the customer?
Which document is sent by a supplier to a customer regarding goods returned or overpayments made by the customer?
- Credit note (correct)
- Remittance advice
- Debit note
- Invoice
A purchase order is issued by a customer to a supplier.
A purchase order is issued by a customer to a supplier.
False (B)
What document confirms that money has been paid, particularly for cash sales?
What document confirms that money has been paid, particularly for cash sales?
Receipt
A document listing all invoices, credit notes, and payments received from the customer is called a ______.
A document listing all invoices, credit notes, and payments received from the customer is called a ______.
Match the following documents with their descriptions:
Match the following documents with their descriptions:
What is the primary purpose of an invoice?
What is the primary purpose of an invoice?
A 'goods received note' (GRN) is typically prepared by the supplier.
A 'goods received note' (GRN) is typically prepared by the supplier.
A document sent with a payment, detailing which invoices are being paid, is called a ______ advice.
A document sent with a payment, detailing which invoices are being paid, is called a ______ advice.
Match each transaction with the appropriate document:
Match each transaction with the appropriate document:
Which of the following is NOT typically found on an invoice?
Which of the following is NOT typically found on an invoice?
A credit note is always printed in red to differentiate it from an invoice.
A credit note is always printed in red to differentiate it from an invoice.
What does GRN stand for?
What does GRN stand for?
The general ledger is also known as the ______ ledger in some systems.
The general ledger is also known as the ______ ledger in some systems.
Match the following ledger account categories with their content:
Match the following ledger account categories with their content:
Why is it important for a business to keep accurate records of all transactions?
Why is it important for a business to keep accurate records of all transactions?
The general ledger contains only income and expenditure accounts.
The general ledger contains only income and expenditure accounts.
What does a debit note do?
What does a debit note do?
A document used by a business to order goods or services from a supplier is known as a ______ order.
A document used by a business to order goods or services from a supplier is known as a ______ order.
Match the document with the scenario:
Match the document with the scenario:
What is the primary reason invoices are typically numbered?
What is the primary reason invoices are typically numbered?
Bank statements are not considered source documents.
Bank statements are not considered source documents.
Name a document that can be regarded as a 'negative' invoice.
Name a document that can be regarded as a 'negative' invoice.
When a business buys goods or services on credit, it ______ an invoice from the supplier.
When a business buys goods or services on credit, it ______ an invoice from the supplier.
Match the following terms with their descriptions:
Match the following terms with their descriptions:
Which document details a consignment from a supplier that arrives without an advice note?
Which document details a consignment from a supplier that arrives without an advice note?
Sales returns result in the issuance of a debit note to the customer.
Sales returns result in the issuance of a debit note to the customer.
What document requests the supplier issue a credit note?
What document requests the supplier issue a credit note?
Trade discount is a ______ in cost if buying over a certain number of items.
Trade discount is a ______ in cost if buying over a certain number of items.
Match the actions with source documents
Match the actions with source documents
What is the significance of dating transactions in chronological order?
What is the significance of dating transactions in chronological order?
Cash purchases require issuing an invoice to the customer
Cash purchases require issuing an invoice to the customer
Why is maintaining cumulative totals important?
Why is maintaining cumulative totals important?
A customer's instruction to a business requesting it to supply goods or services is documented using a ______.
A customer's instruction to a business requesting it to supply goods or services is documented using a ______.
Match descriptions to their terms.
Match descriptions to their terms.
Which of the following best explains the function of a remittance advice?
Which of the following best explains the function of a remittance advice?
Credit sales require a receipt to be issued
Credit sales require a receipt to be issued
What is the purpose of a General Ledger?
What is the purpose of a General Ledger?
The document provided by a supplier for a purchase on credit is called an ______.
The document provided by a supplier for a purchase on credit is called an ______.
Match
Match
The invoice sent was correct but when the china shop received the plates it found that they had all been broken in the mail and that it was going to send them back. The china shop has received an invoice for $62.10, it has no intention of paying it because the plates were useless. What formal document does the china shop need to send to China Supplies?
The invoice sent was correct but when the china shop received the plates it found that they had all been broken in the mail and that it was going to send them back. The china shop has received an invoice for $62.10, it has no intention of paying it because the plates were useless. What formal document does the china shop need to send to China Supplies?
Flashcards
Source documents
Source documents
Documents used to record business transactions, serving as the basis for all recorded information.
Sales order
Sales order
A customer's formal request to a business for goods or services.
Purchase order
Purchase order
A business's formal request to a supplier for goods or services.
Goods received note
Goods received note
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Goods despatched note
Goods despatched note
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Statement
Statement
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Credit note
Credit note
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Debit note
Debit note
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Remittance advice
Remittance advice
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Receipt
Receipt
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Bank statement
Bank statement
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Invoice
Invoice
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Credit Note
Credit Note
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Ledger accounts
Ledger accounts
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General ledger
General ledger
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Study Notes
- Business transactions get recorded on source documents like sales and purchase orders, invoices, and credit notes
Types of Source Documents
- Source documents are records of business transactions involving sales, purchases, receiving/paying money, or owing/being owed money
- Sales order: An order for goods or services written/signed by a customer
- Purchase order: An order for goods/services (e.g., material supplies) from a business to another business
- Goods received note: A list of goods received by a business from a supplier, typically prepared by the business's warehouse/goods receiving area
- Goods despatched note: A list of goods sent out by a business to a customer
- Invoice: an itemized list of goods or services provided
- Statement: A supplier's document to a customer listing all invoices, credit notes, and payments received
- Credit note: A supplier's document to a customer for goods returned or overpayments, which acts as a 'negative' invoice
- Debit note: A customer's document to a supplier for goods returned or overpayments, formally requesting a credit note
- Remittance advice: Sent with a payment describing which invoices are being paid and which credit notes are offset
- Receipt: Written confirmation of money paid, typically for cash sales like till receipts
- Bank statements: Source documents received in hard copy or viewed online, allowing a business to check its bank balance
Invoices
- An invoice relates to a sales order or purchase order
- When a business sells goods/services on credit, it sends an invoice; invoice details should match the sales order details and acts as a request for payment
- When a business buys goods/services on credit, it receives an invoice from the supplier; invoice details should match the purchase order details
- An invoice is primarily a demand for payment and is used for other purposes
Invoice Contents
- Most invoices are numbered, helping the business track them
- Common invoice information includes the seller and purchaser names and addresses
- Date of the sale
- A description of what is being sold
- Quantity and unit price, e.g., 20 pairs of shoes at $25 a pair
- Trade discount details, e.g., a 10% reduction for buying over 100 pairs of shoes
- Total invoice amount, including sales tax/GST/VAT
- The payment due date and other sales terms
- Also includes any cash/settlement discounts and the discounted amount
Credit Notes
- A credit note sent to correct overcharge of $100
- A credit note is sent if plates was delivered broken, rendering them useless
- China Supplies sends out a credit note. These can be printed in red to distinguish them from an invoice
- The note should be similar to the invoice, but less detailed and labeled 'Credit Note Number' instead of 'Invoice Number.';
- Relates to returned goods or refunds when a customer has been overcharged and is regarded as a negative invoice
Other Documents
- Debit notes and goods received notes are sometimes used in connection with sales and purchases
- Debit Note: Formally requests a credit note from a supplier
- Goods Received Notes (GRNs): Record goods received, typically in a warehouse
- GRNs may supplement suppliers' advice notes and allow the accounts department to verify goods receipt before paying a supplier's invoice
Main Types of Business Transactions
- Cash sales: Issued a receipt
- Credit sales: Invoice will be issued to the customer
- Sales returns: A credit note reduces/negates the original invoice
- Cash purchases: A receipt is given
- Credit purchases: The business gets an invoice from the supplier
- Purchase returns: A credit note is received from the supplier (usually after a debit note is given)
- Receipts: Largely for cash sales or from credit customers for credit sales
- Payments: Mainly for cash purchases or to credit suppliers
Ledger Accounts
- Ledger accounts record the transactions of the business
- These accounts are in the general ledger, the nominal ledger
General Ledger Details
- Businesses record transactions, assets, and liabilities for preparing financial statements
- These records are kept chronologically, dated for specific periods, and built up in cumulative totals (day-by-day, week by week, month by month, year by year)
- The general ledger is an accounting record summarizing a business's financial affairs, containing all principal ledger accounts; also known as the nominal ledger in some systems
- The ledger details assets, liabilities, capital, income, expenditure, and profit/loss, with numerous accounts each having its own purpose/name/code
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