Last Updated 20 Apr 2022

P1 Identifying the Documents Used to Record Business Transactions

Words 1140 (4 pages)

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.

Order custom essay P1 Identifying the Documents Used to Record Business Transactions with free plagiarism report


Read also Recording General Fund Operating Budget and Operating Transactions

The VAT registration number should be on the invoice, usually below the name and address. * Invoice Number – it will identify a specific invoice for the buyer and seller. Pro Forma Invoice VAT It means for forms sake. It is sent to a new customer, or an existing customer who has been late making a payment It is sent to the buyer before the goods are delivered The details are the same as on an ordinary invoice. The goods are delivered after the payment has been made.

When the goods are paid for a normal invoice is issued. It sets out charges which have to be paid in advance. Debit Note This is issued by the seller and sent to the buyer. It Is Essentially an Additional Invoice It is used to correct errors e. g. if goods were invoiced at a lower price than it should been or if some goods were over charged. 4. Credit Note A credit note is a document issued by a seller to a buyer. The seller usually issues a credit memo for the same or lower amount than the invoice, and then repays the money to the buyer or sets it off against a balance due from other transactions.

A credit note lists the products, quantities and agreed prices for products or services the seller provided the buyer, but the buyer returned or did not receive. It may be issued in the case of damaged goods, errors or allowances. In respect of the previously issued invoice, a Credit Memo will reduce or eliminate the amount the buyer has to pay. Reasons for issuing a credit note: * To correct a mistake e. g. being over charged * Goods are faulty or damaged * The goods were not delivered * The wrong goods were delivered Details on the credit note include: The date * The original invoice number * Date * The reason credit is being given * The addresses of the buyer and seller It Is Often Printed In Red 5. Statement The seller sends all regular customers a statement at the end of the month. This Is a Copy of The Customer’s Accounts in The Sales Ledger. It lists all transactions with customers during the month: * Any payments received * All invoices issued * It shows outstanding balance * Any credit note issued Details include: * Date * Details of invoices issued * The name and address of the customers The customer’s account number * The name and address of the supplier * Any credit note issued * Any payments made * The amount outstanding i. e. the balance 6. Goods Received Note(GRN) This is an internal document used by the buyer, usually in the stock department to record goods being delivered. Copies are sent to various parts of the business: * The department that ordered the goods, to let them know that goods have arrived * The accounts department so they can “marry” the invoice, the purchase order and the GRN * The purchasing department who placed the order.

P1 Identifying the Documents Used to Record Business Transactions essay

Related Questions

on P1 Identifying the Documents Used to Record Business Transactions

What is a P1 document used for?

P1 Identifying the Documents Used to Record Business Transactions. 1. 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.

What are the primary documents of a transaction?

i. Primary Documents The document that is obtained from the source as soon as the transaction takes place is called the primary document of the transaction. The primary documents are ii. Final Documents

What is the P3 objective of system of accounts?

P3 Prepare financial statements from business transactions. 2- © McGraw-Hill Education. Learning ObjectiveC1: Explain the steps in processing transactions and the role of source documents. 2- © McGraw-Hill Education. System of Accounts Learning Objective C1: Explain the steps in processing transactions and the role of source documents.

What documents do you need to do business transactions?

Do you want to do some business transactions and you are worried which documents to use? The following documents can help in doing your business transactions. Delivery note -it is like an invoice but is send when goods are being delivered to the customer. It contains names of the buyer and supplier, date, quantity of product, price and terms

This essay was written by a fellow student. You can use it as an example when writing your own essay or use it as a source, but you need cite it.

Get professional help and free up your time for more important courses

Starting from 3 hours delivery 450+ experts on 30 subjects
get essay help 124  experts online

Did you know that we have over 70,000 essays on 3,000 topics in our database?

Cite this page

Explore how the human body functions as one unit in harmony in order to life

P1 Identifying the Documents Used to Record Business Transactions. (2017, Jan 26). Retrieved from

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Save time and let our verified experts help you.

Hire writer