O Level Revision :Commerce - Documents Used in Trade

Documents Used in Trade  

Business documents are used to record business transactions between sellers and buyers of goods and services. The documents form the basis for proper accounting systems.

1. A letter of enquiry

• A buyer sends letters of enquiry to sellers to request for quotations or price lists of products.
• After receiving the quotations the buyer compares the prices and terms.
• The buyer chooses and orders from sellers with better terms of payment.

2. A quotation

• A seller sends a buyer a quotation.
• A quotation shows: prices; details of goods; discounts given; terms of payment;
• delivery terms.
• During hyperinflation periods, quotations hold for a day or less.

3. A price list

• This is a list of items on sale; their prices; terms of trade.
• The buyer gets it, compares prices with other price lists, chooses the goods and buys them.

4. An order

• An order contains: description; quantity; size; brand name of goods required.
• Two or more copies of the order are prepared.

5. An invoice

• A seller sends a buyer an invoice.
• It shows: quantity; price; value; discounts; terms of payment; terms of delivery.

6. A delivery note

• This accompanies the goods bought.
• It contains details and quantities of goods sent by the supplier’s own transport.
• It enables the driver to check against the goods to be loaded, offloaded and delivered.
• The buyer’s signature on the delivery note acts as proof of delivery.

7. A credit note

• A credit note is printed in red.
• It is issued by a seller: to correct an overcharge; when a seller owes buyer money; when the buyer returns damaged goods, containers, coupons or gift vouchers.

8. A debit note

• The seller raises it when the buyer is undercharged.
• The invoice shows a lesser amount than what is owed.
• The undercharge may be a result of calculations errors; omission to charge an item sent to the customer; omission of taxes; or failure to charge for returnable containers.

9. A consignment note

• Issued when the supplier uses transport other than their own to deliver goods.
• Private carriers like Swift, Clan and Car Junction or National Railways of
• Zimbabwe carry the goods from seller to buyer.
• The consignment note instructs the carrier to accept the goods and deliver them to the customer.
• Both carrier and customer sign a copy of the consignment note to acknowledge receipt of the goods.

10.A receipt

• A buyer pays for an item or service.
• A seller issues a receipt.
• The receipt contains quantity, name, price of item and date of payment.
• This is proof of payment.

11.A statement

• A seller sends a buyer a statement monthly when goods are sold on credit.
• It shows a summary of transactions, amount owed, the payments required and due date.
• The seller reminds the buyer to pay the instalment due.

Multiple choice questions

1. Business documents show the details of the
2. buyer’s financial status.
3. seller’s creditworthiness.

1. source of the business documents.
2. transactions between buyer and seller.
3. A quotation is

Essay question

2. Explain the contents and functions of any three business documents.