AAT Level 2 Chapter 4 - Business Documents

Definition - A document issued by a supplier to a potential customer, it sets out the specific price of the goods or services and the terms and conditions that the potential customer would have to abide by if they were to purchase the goods or services.

A quotation will likely contain the following information:

• Precise details of the goods or services offered for sale.
• Details of the quantity of the goods or services offered for sale.
• Price(s) of the goods or services offered for sale.
• Terms of trade - period of credit and any trade discount and/or discount terms for promt payment.
• Time for delivery, place of delivery and who will pay for delivery.

Definition - a catalogue or price list is issued by a supplier to a potential customer when a document as detailed as a quotation is not necessary. The catalogue or price list will contain most of the information within a quotation, but is likely to be more general and less detailed.

The catalogue or price list ia likely to include:

• A brief description of the product.
• A product code or reference number.
• The product unit price.

Definition - issued by a buyer to a supplier when the buyer wishes to purchase goods or services.

Purchase orders usually contain:

• The quantity of goods required.
• The address where delivery is to be made.
• The date delivery is required.
• The agreed price set out on the quotation or catalogue/price list.
• A description of the goods required.

Each order is given a purchase order number which is the quoted on subsequent documentation such as delivery notes and invoices. This makes it easier to find and retrieve them from within the filing system andcheck them against goods received details so that buyers can verify that orders have been fulfilled by suppliers.

Definition - a document that is sent with goods when they are delivered.

The delivery note will contain:

• A delivery note number for filing and future reference.
• Reference to the customer's purchase order number.
• Details of the quantity, catalogue and product code number and a description of the goods delivered.
• The signature of the person receiving the goods and the date the goods were delivered.
• The delivery not does not make reference to the prices of the goods delivered.

Definition - a document issued by the supplier to the customer when goods or services are supplied on credit. It summarises the transaction between the two parties and indicates how much  the customer owes for the goods delivered or servies supplied.

The supplier will record the invoice the issue as a sales invoice in their bookkeeping system.

The customer will record the invoice they receive in their bookkeeping system as a purchase invoice.

Details found in the invoice:

• Invoice number.
• Date of supply.
• Suppliers trading name, address and VAT  registration number.
• Name and address of customer and ledgar account code.
• Product codes and description of goods or services supplied.
• Quantity of goods or extent of services supplied.
• Unit value of goods/services supplied (excluding VAT).

• Rate of VAT applicable to each line of goods or services supplied.
• Total value (excluding VAT) of the goods or services supplied. Also known as net goods value.
• The total of the VAT charged.
• The invoice total (the total amount charged to the customer including VAT)
• A summary or analysis of the goods value and the VAT where supply comprimises of a mix of goods or services at different rates of VAT.
• The terms of trade (including promt payment terms where a promt payment discount is offered).

Definition - issued by a supplier to a customer to account for a reduction in an amount previsouly invoiced.

Reasons for issuing a credit note:

• There may have been an overcharge on the original invoice due to errors.
• Goods are faulty, and the suppplier has agreed to the return of the goods and to give the customer a refund.
• Incorrect quantity of goods delivered.
• Overpayment of an invoice.
• Not taking the correct discount resulting in an overpayment.
• A prompt payment discount has been takep up by a customer and the supplier has opted to issue  a credit note to account for the discount and the VAT adjustment when a prompt payment discount is take up.

Credit notes should contain the following information:

• Reason for issuing the credit note.
• Where goods are returned - the details/description of the goods, thier price and VAT chargeable.
• The number of the original sales invoice.

Supplier issuing the credit note records it as a sales returns transaction in their bookkeeping system, whereas the customer receiving the credit note records it as a purchase returns transaction in their bookkeeping system

Definition - issued by the supplier when there is a mistake on the invoice which results in the customer being undercharged.

Definition - statements of account are usuallty sent by suppliers to each of their credit customers at the end of each month of trading. It represents a summary of transactions which have taken place between the two business's in the month.

It usually provides the following information:

• It opens with any amount outstanding and unpaid from the previous statement; described as 'balance brought forward'.
• Amounts which decrease the amount the customer owes the supplier appear in a column headed 'Credit'. For example a credit note.
• Amounts which increase the amount the customer owes the supplier appear in a colomn headed 'Debit'. For example invouces and debit notes.
• The column headed 'balance' is adjusted following every transactions to provide a running balance.
• At the end of the month the amount outstanding (amount now due) is shown at the bottom of the statement.