1. Business Documents
This presentation provides an overview of the key points and financial documents related to paying for purchases.
Note for tutors:
If you wish to print out these slides, with notes, it is recommended that, for greater clarity you select the ‘pure black and white’ option on the PowerPoint print dialogue box.

2. The sequence of documents
Payment notification
Seller makes out invoice listing goods, price, discounts and VAT
Credit note is issued if any goods are returned
End of month – seller issues statement of account listing all transactions and balance owing. May include remittance advice slip for buyer to return with payment
This slide lists the key documents relating to payment notification, in sequence. In this case the students should note that all the documents are issued by the seller of the goods and sent to the buyer.

3. The invoice
An invoice is sent from a supplier to a customer after the goods have been delivered. In reality, and on a computerised system, it may be produced at the same time as the delivery note and have a similar layout. The key difference is that the invoice contains details of prices and the amount owing, which the delivery note did not. On the example only one item has been ordered. Had several been requested then these would have been listed separately and, in each case, the unit price and net value inserted. Students should understand that ‘unit price’ relates to the price of one item as quoted in a catalogue. This may be a single item (eg a printer) or a multiple (eg box of 50 disks or box of 1,000 envelopes). The net value is the value of the items but does not include VAT.

4. The invoice – key points
Always on headed paper
Invoice shows VAT registration number
All items listed separately, then totalled
Include the Trade Discounts
VAT added to sub-total to give total due
Terms = date when payment due
E & OE = errors and omissions excepted – gives firm right to amend errors later.
This slide summarises the key points relating to invoices. Students should note that invoices are checked before they are paid – both against the original order and the GRN. The calculations should also be checked before payment is authorised. On a computer package, the amount can be checked against the total to be charged for the order according to the computer records. Any difference should be investigated.

5. Debit Note
Credit notes are not needed for every purchasing transaction. They are only used if an amount of money needs to be refunded (credited) to the customer’s account. The calculations are identical to those shown on the invoice.

6. Debit note – key points
Only issued by the customer to the supplier when there is a problem and a refund is required, eg
Goods damaged
Incorrect goods delivered – and returned
Fewer goods delivered than charged on invoice
Overcharge on invoice
This slide summarises the main reasons why a credit note may be issued. Students should understand that it is not practical to issue a new invoice (which would confuse everyone). Equally, a refund is not appropriate because nothing has yet been paid! A credit note adjusts the amount owing on the customer’s account, as can be seen on the next slide, which covers the statement of account.

7. Credit note
Credit notes are not needed for every purchasing transaction. They are only used if an amount of money needs to be refunded (credited) to the customer’s account. The calculations are identical to those shown on the invoice.

8. Credit note – key points
Only issued by the supplier to the customer when there is a problem and a refund is required, eg
Goods damaged
Incorrect goods delivered – and returned
Fewer goods delivered than charged on invoice
Overcharge on invoice
This slide summarises the main reasons why a credit note may be issued. Students should understand that it is not practical to issue a new invoice (which would confuse everyone). Equally, a refund is not appropriate because nothing has yet been paid! A credit note adjusts the amount owing on the customer’s account, as can be seen on the next slide, which covers the statement of account.

9. Statement of account
Tutors are advised to work through this slide, line by line, with students. The key points on the next slide can then act as reinforcement. The importance of each customer having a credit limit can be discussed – and the factors which may help to determine this figure. Obviously, the total on the statement should never exceed this figure.
On the 1 June, Jones and Kelly owed £70 from last month which they paid on the 13 June. They ordered more goods which were invoiced on 12 June and on the 14 June a credit note was issued. Two issues are critical for students. They must understand which type of items are entered under the ‘debit’ column and which are entered under the ‘credit’ column. They also need to understand that the final column gives a ‘running balance’ and is always recalculated after each transaction or payment.

10. Statement of account – key points
Sent at end of month
Starts with any amount owing from previous month
All invoices add to amount owed
All credit notes and payments reduce amount owed
Final column shows balance after each transaction
Ends with current amount due
May include remittance advice for payment
This slide summarises the key points. It is worth students understanding that customers will wait until they receive a statement before they make payment. This saves money in staff time processing payments and in postage. All items on the statement must be checked carefully. On a computerised system, the statement should obviously accord with the record in the supplier’s account for that month.

11. The sequence of documents
Stage 3 – making payment
Buyer checks invoice and statement
If correct, normally pays by cheque.
Note: receipts may be issued by seller if cash payments are received for any reason
This slide summarises the sequence of events when invoices and statements are paid. Using a cheque is one of several methods of payment. Other methods are covered in chapter When a customer sends a cheque to a supplier, the supplier pays the cheque into their bank. The money is then transferred from the customer’s bank account to the supplier’s.

12. Cheque
Cheque
Counterfoil
Actual
Cheque

13. Cheques – key points Cheques printed by banks
Business cheques include company name
May be completed by hand or printed by computer
Items completed are: date, payee, amount in words and figures
Cheques for large amounts signed by more than one person
Counterfoil states reason for payment
Tutors may wish to refer to the printed cheques in the Student Handbook at this point, or circulate blank photocopied cheques from the Handbook or Teachers’ Resource Pack. Today only small firms write out cheques by hand. They are mainly produced by computer in large ‘cheque runs’ which are undertaken at certain periods. The signatures are stored (with security protection) in an automated system. Other precautions taken to reduce the possibility of fraud include multiple signatures (and specific signatures) required for larger cheques. In some cases, cheques for very large amounts may have to be signed personally by the MD and one/two other senior directors.

14. Receipt RECEIPT RECEIPT NO.: 44 S
The Weaving Shed 14 Industrial Street Hightown
Received from Sew and Sew the sum of $ 351 (three hundreds and fifty one dollars) by cheque
30 May Paula King Chief Cashier
Receipts are common – students will receive dozens each week whenever they pay for goods. A handwritten receipt may be prepared for a particular purpose or by a service company which would not use cash registers (eg a person paying a solicitor’s bill in cash).

15. Receipt – key points Proves amount was paid
Should be kept safely in case goods faulty
Normally only issued for cash payments – not required for cheque payments
This slide summarises the key points of cash sales receipts. Their main purpose is to provide proof of payment. It is sensible to keep a receipt safely in case the goods later prove to be faulty as it will be requested by the seller if the goods are returned.