Business Documents Unit 4 PDF

BUSINESS DOCUMENTS UNIT 4 SLIDESMANIA  Answer the following questions using the responses: Yes, always, Sometimes or No idea/Never. 1. Do you know how much money you spent yesterday?...

BUSINESS DOCUMENTS UNIT 4 SLIDESMANIA  Answer the following questions using the responses: Yes, always, Sometimes or No idea/Never. 1. Do you know how much money you spent yesterday? 2. When you buy something from a shop or a vendor, and you pay with a larger bank note, do you always check your change? 3. Do you write ‘To Do Lists’ with all the things you need to do written down and then tick them off as you do them? 4. When you accompany your parent going food shopping, do they make a list of what they need to buy before going shopping? 5. When you or your parents buy a number of items from a shop, do you make sure you get a receipt and check that it is correct? 6. What do your answers tell you about you and your family’s attitude to record keeping and checking? SLIDESMANIA  Importance of Record Keeping SLIDESMANIA  Introduction ➔ Trade - takes place when producers of goods and services supply customers in return for other goods and services. ◆ May involve simple verbal or written contracts or specialty contracts. ➔ Business organizations are both producers and consumers of goods and services, since the running of a business involves transactions. SLIDESMANIA  Importance of Record Keeping Record Keeping - the process of creating, collecting and maintaining records of documents which act as evidence of business transactions. ➔ Whenever a business conducts any form of transaction, it is important to ensure detailed and accurate records are created and kept. ➔ Record keeping transactions include: prices/values of goods, when good were received or delivered, received from and delivered to, money owed, received or paid out, business names and addresses. SLIDESMANIA  Importance of Record Keeping Provides a way 03 05 to safeguard Informed and retrieve Decision Making information 01 04 Reduces the risk of Theft and To Meet Legal Fraud Requirements 01 02 02 03 Helps Evaluate Performance SLIDESMANIA  Importance of Record Keeping Safeguard & Retrieve Evaluates Business ➔Safeguards information about Information Performance sales, customers and suppliers. ➔ Records helps businesses to ➔Keeps track of frequency of sales monitor their performance. and purchases of popular or ➔ To provide up-to-date unpopular products for stock information to owner and adjustments. manager to see if progress ➔Ensures a fully stocked inventory has been made. (eg - sales, system. expense and profit reports) ➔Develops long term relationships ➔ Helps to compare with it customers. (customer with performance to previous credit history) trading periods. ➔Assessing supplier relationships ➔ Helps to compare against (late deliveries) performance of rival ➔Sales or purchases query for SLIDESMANIA companies. clarification of prices, quantities, payment dates, etc  Importance of Record Keeping Informed Decision Making To Meet Legal Requirements ➔Ensures there is evidence of ➔Record keeping promotes transactions, which is important in informed decision making. ensuring that legal obligations are ➔Helps to determine whether met. new measures are required to ➔Use of written contracts to verify improve performance. (eg - new terms and conditions. marketing campaigns, cost ➔Publishing financial statements cutting measures.) (Public Limited Companies) ➔Records indicate the overall ➔Audit - an objective inspection of a performance of the business business’s financial records to depending on the decisions determine whether the records are a made and the resulting true and fair representation of the outcomes. transactions they seem to SLIDESMANIA represent. Can be done internally or externally  Importance of Record Keeping Reduce the Risk of Theft and Fraud ➔Stock and cash records can be used to check for theft. ➔Complete and accurate records will ensure that the amounts the business should have, is what it has. ➔Record keeping can discourage theft as records can be used to uncover the identity of thieves. SLIDESMANIA  SHARING TIME ➔ Define the term trade. Give an example. ➔ What is record keeping? ➔ What are 5 reasons that record keeping is important? Explain 2. ➔ What are some details that a record keeping document should include? ➔ What are some business documents that are necessary for a business? SLIDESMANIA  Types of Business Documents ➔ Businesses have developed special paper or computerised documents for record keeping to make the process less time consuming. ➔ It ensure that relevant information is recorded in the same format for each transaction, regardless of who records it. SLIDESMANIA  Types of Business Documents Purchase Pro-forma Purchase Invoice Requisition Invoice Order Statement Stock Cards Debit Note Credit Note of Accounts SLIDESMANIA  Purchase Requisition ➔ Internal business document use to inform the relevant personnels (purchasing staff, managers, finance personnel) in a business that a purchase is being requested. ◆ These relevant personnels have the purchasing authority/responsibility for how money it to be allocated, hence the reason why their approval is necessary before purchases. ➔ Purchase requisition should state: items and quantities being requested, expected price and suppliers of the item, the department making the request, objectives hoped to be achieved by making the request, and which department is SLIDESMANIA paying for the purchase. ➔ Once approved, the purchasing process moves on to the next  Purchase Requisition SLIDESMANIA  Pro Forma Invoices ➔ The pro forma invoice is an estimate or quotation, also known as a preliminary bill of sales that the supplier sends back. ➔ The supplier sends back a pro forma invoice to the the purchasing department in their request for information about products, prices and quantities. ➔ This invoice itemises the products or services that the supplier is willing to deliver at a specific price, and is sent to the buyer before it is actually delivered so that the buyer can agree to the purchasing of the items. ➔ For accounting and records the pro forma is treated as an actual sale, and until the buyer agrees to the purchase SLIDESMANIA and the goods are delivered the sale has been made.  Pro Forma Invoice SLIDESMANIA  Purchase Order ➔ Document issued to a supplier that stipulates what is being purchased. ➔ A purchase order entails: buyer’s name, date, product/service description, payment terms freight terms, delivery date and address and contractual references. ➔ Generally accepted as a legal offer which is accepted by the supplier. ➔ Purchase orders carry the same reference number as the preceding purchase requisition. SLIDESMANIA  Purchase Order SLIDESMANIA  Invoice ➔ A document showing the details of goods bought or sold. ➔ A seller sends an invoice to the customer. ➔ To the seller it is a sales invoice, but to the buyer it is a purchase invoice. ➔ An invoice entails: name of the seller, contact information of the seller, name and contact information of the buyer, dates of purchase, date the invoice was sent, invoice number, item quantities, unit prices and total costs, total owed and terms of payment. SLIDESMANIA ➔ For accounting and record keeping, an invoice represents that a sale has been made. Invoice SLIDESMANIA  Pro Forma Invoice Vs. Invoice Pro Forma Invoice Invoice Described as Quotation Bill Issued Before an order is made Before payment is made Objective To help the buyer determine To show the buyer the amount whether to order due for payment. Accounting Does not represent a Represents a sale/purchase sale/purchase being made being made. Information Shows the name and contact Shows the names, and contact information of the supplier and information of the supplier and buyer, as well as the types of buyer, as well as the types of goods, quantities and prices goods, quantities and priced inquired about. related to the a purchase/sale. SLIDESMANIA  Credit Note ➔ A document sent by the seller to the buyer indicating that the buyer’s outstanding balance to the seller has been credited or reduced. When is a Credit Noted used? Goods are returned by the buyer to the supplier for faulty or wrong items. The price on the invoice sent to the buyer was overstated. Discount rates were not applied or applied incorrectly on an SLIDESMANIA invoice sent to the buyer.  Credit Note SLIDESMANIA  Debit Note ➔ Can be sent by the seller to the buyer indicating that the buyer’s outstanding balance has been debited or increased. When is a Debit Note used? The buyer was previously undercharged The discount rate applied on the invoice was too high The tax rate applied on the invoice was too low. SLIDESMANIA Debit Note SLIDESMANIA  A Statement of Account A document sent by the buyer showing details of transactions that occurred over a specified period. This includes: purchases made by buyer, payments made during the period, returned good, outstanding balances. ○ Eg - Bank statements SLIDESMANIA  Statement of Account SLIDESMANIA  Stock Card An internal Business document used for recording the movement of stock. ○ Also referred to as an inventory card. The stock control card typically shows the maximum and minimum stock levels, purchases and sales of stock and the corresponding balance of stock. A simple system. Can be done manually or electronically. It is important for a business to monitor and record stock levels to ensure it does not run out of goods, as well as SLIDESMANIA minimize storage requirements and costs.  Stock Cards SLIDESMANIA