P1 Identifying the Documents Used to Record Business Transactions

Topics: Invoice, Value added tax, Purchase order Pages: 5 (1099 words) Published: April 18, 2013
P1 Identifying the Documents Used to Record Business Transactions

1. Issue of a Purchase Order
A purchase order (PO) is document issued by the buyer to the seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. Sending a purchase order to a supplier is a legal offer to buy products or services. If the seller agrees to selling to the buyer it forms a contract between the two.

It should include:
* The order number, so it can be traced and matched with invoices and statements * The purchasers name and address which is usually across the middle of the document * The price
* The name and address of the supplier
* The catalogue/reference number
* Authorisation i.e. signature and date
* A description of the goods required
The Delivery Address May Be Different
Companies use Purchase Orders for several reasons: price * Purchase orders allow buyers to clearly and explicitly communicate their intentions to sellers * Sellers are protected in case of a buyer's refusal to pay for goods or services * Purchase orders help a purchasing agent to manage incoming orders and pending orders

If The Order Is Not Properly Authorised It Will Not Be Processed

2. Delivery Note

This is the document is sent with the goods. It lists the items which have been sent. The buyer uses this to check the goods ordered have arrived. It is signed by the buyer and it is then sent back to the seller as a proof of delivery.

The person receiving the goods signs it after checked the quantity of the goods delivered.

Information on the Delivery Note:
* The method of delivery
* Purchase order number
* The signature of the person receiving the goods
* The catalogue number and quantity

The Price Is Usually Not On the Delivery Note

3. Invoice
An invoice is a document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the sale transaction only. Payment terms are usually included on the invoice. The buyer can also have a maximum number of days in which to pay for these goods and is sometimes offered a discount if paid before the due date.

This is probably the most important document.

This is an official request for payment.

It includes:
* The Word Invoice 
* A Unique Reference Number In Case Of Correspondence About The Invoice * Date of the Invoice.
* Tax Payments
* Name And Contact Details Of The Seller
* Tax Or Company Registration Details Of Seller
* Name And Contact Details Of The Buyer
* Date That The Product Was Sent Or Delivered
* Purchase Order Number
* Description Of The Products
* Total Amount Charged - optionally with breakdown of taxes, if relevant * Payment Terms - method of payment, date of payment, and details about charges for late payment * The Purchase Order Number - the invoice is checked against the goods ordered, the invoice and the goods delivered, the process is called “marrying up”. The buyer only pays if all three documents match exactly. * Terms – this informs the buyer how long before he has to pay for the goods. The amount of cash discount for fast payment will also be stated. * Carriage – this states the cost of transportation the seller has to pay. Carriage forward means how much the buyer has to pay for transportation * E & OE – “errors and omissions expected” this allows the seller to correct any mistakes on the invoice at a later date. * Trade Discount – this amount will be deducted from the invoice price e.g. buying in bulk. * Value Added Tax (VAT) – this is added to the cost of the goods on the invoice. The VAT registration number should be on the invoice, usually below the name...
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