Documents used in buying and selling of goods.
When business transactions occur, certain documents are drawn up and passed from one person to another. These documents are used to effect transactions between buyers and sellers. The documents are explained below;
- TRADE JOURNAL: This is a publication devoted to a particular branch of retail and wholesale trade. It contains articles on matters of interest to those in the trade.
USES OF TRADE JOURNAL
- It contains information on matters of interest to those in the trade.
- It shows information about price and other matters.
- LETTER OF INQUIRY: This is a document sent by the buyer to the supply to find out about the availability of goods, the prices, terms of payment and delivery. Letter of enquiry is considered as the first step to be taken by the prospective buyer. It is a request to the supply to provide information about the product.
LETTER OF ENQUIRY
Alex Bookshop,
No. 6, Baale Street,
Ajegunle,
10th of August, 2007
Ambra Bookshop
Iyana Ipaja, Lagos.
Dear Ma,
We require 500 pieces of Sharp Calculating Machines urgently. Please send to us quotation for the above items stating the terms of trade.
Yours faithfully,
Manager.
- QUOTATIONS: A quotation is a statement of the current price and terms of trade of a product or service. Usually a quotation is an answer to an inquiry and therefore, it is applicable to that specific transaction only.
CONTENTS OF QUOTATION
- The current price of the goods to be sold.
- Discounts available.
- Costs and date of delivery.
- Terms of payment.
USES OF QUOTATION
- It is used as a reply to an enquiry.
- Shows the current price.
- It shows the terms of trade.
A QUOTATION
Ambro Bookshop
No. 3212 Iyana Ipaja, Lagos.
20th August, 2007
Alex Bookshop,
Baale, Ajegunle.
| S/N | Description | Qty | Unit Price | Price |
| 1. | Sharp Calculating Machine | 500 | 50 | 25,000 |
Delivery – Within 21 days
Terms – 5% cash discount
2½%
Within 30 days
Trade discount 10% from order.
- CATALOGUES AND PRICE LIST: A catalogue is a document used for pictorial representation of goods available for sale. It contains the photographs, features and price of goods. The booklet enables a prospective buyer to study the samples.
PRICE LIST: This sent by the seller to the buyer to give information about the current prices of goods.
USES OF CATALOGUES AND PRICE LIST
- Catalogues can be used as a reply to an enquiry.
- Provides information about the picture or photograph of goods.
- They give the current price of products.
- Price lists can be used by retailers to wholesalers.
- Catalogues help to advertise the products.
- They assist the customers to make choices.
- ORDER: This is a document which states the quantity of goods required and all necessary details about the package of the goods. An order will be placed when the buyer is satisfied about the conditions attached to the transactions. The seller can supply it or the buyer can use his printed order form. When it is accepted, a legal contract exists between the buyer and the seller.
CONTENTS OF AN ORDER
- Addresses of both parties to the transactions.
- Quantity of goods needed.
- Description of goods.
- Price of each item.
USES OF AN ORDER
- It is used to make a purchase.
- Shows the quantity of goods to be purchased.
- Acceptance signifies beginning of a contract.
AN ORDER
Alex Bookshop
No. 6, Baale Street,
Ajegunle.
25th August, 2007.
Ambra Bookshop,
Iyana Ipaja.
Please supply the following,
| Quantity | Description | Unit Price | Total |
| 500 | Sharp Calculating Machine | 50 | 25,000 |
- INVOICE: This is sent by the seller to the buyer showing the full details of goods sold such as quantity, description, price, discount and the total amount to be paid. It shows a comprehensive summary of a transaction, it is issued along with the goods.
CONTENTS OF AN INVOICE
- Name of the seller.
- Address of the seller.
- Customer order number.
- Description of goods bought.
- The actual amount.
- The price of the goods.
- Discount given.
- Quantity of goods purchased.
- Abbreviation E & OE (Error & Omission) Excepted.
USES OF AN INVOICE
- Shows details of goods sold.
- It serves as a receipt.
- Used to prepare purchases and sales journal.
- Evidence of credit sales.
- Shows time of delivery and payment.
AN INVOICE
Ambra Bookshop
Iyana Ipaja
29th August, 2007.
Sold to Alex Bookshop
Baale, Ajegunle.
| S/N | Description | Qty | Unit Price | Total |
| 1 | Sharp Calculating Machine | 500 | 50 | 25,000 |
Terms 2% cash discount within 21 days.
5% Trade discount within 1½% month.
Net 2 months
E & OE
TERMS UNDER INVOICE
- E & OE: Error and Omission Excepted. This means that the supplier has the right to make necessary corrections, if it is discovered later that there are errors, mistakes or omission, in the invoice.
- Net 3 Months: This simply means that there will be no discount after three months. The buyer would pay the total amount after three months.
- 5% Trade Discount: This implies that 5% trade discount would be given to the customer when buys in large quantity. It is the reduction of the catalogue price to induce customers to buy more goods because he will pay less.
- 2% Cash Discount: This means that a 2% cash discount would be allowed on settlement of account if buyers pay cash within a specified period. It reduces the amount to be paid.
PROFORMA INVOICE
This is a commercial document, which serves as a polite request for payment when a supplier is not willing to allow his customer credit and it is also used when goods are sent on approval. It is like the ordinary invoice except the expression “proforma” will be written across it.
USES OF PROFORMA INVOICE
- It is used when goods are sent on approval.
- Serves as quotation.
- It is a reply to a letter of enquiry.
- Polite way of refusing credit.
- Gives the agent the idea of the price at which to sell the goods.
- As a polite request for payment before goods are delivered.
DIFFERENCE BETWEEN INVOICE AND PROFORMA INVOICE
| S/N | INVOICE | PROFORMA INVOICE |
| a. | It is sent with the goods. | It can be sent without the goods. |
| b. | Used as evidence of credit sale. | Used when the seller does not want to sell on credit. |
| c. | Used to confirm sale. | Used when the buyer needs information the seller on terms of sale. |
ADVICE NOTE.
This is a document sent to buyer to inform him that the goods ordered have been dispatched. It is basically to give information that the goods are on their way to the customer so that he can receive them. It is normally sent ahead of the goods.
USES OF ADVICE NOTE.
- To inform the buyer about the dispatch of the goods.
- To show the mode of transport used.
- To show the likely time of arrival.
- To inform the buyer about the quantity and the type of goods to expect.
DELIVERY NOTE
This is a document sent by the seller to the buyer for signature when goods are delivered to him and it will serve as evidence that delivery has been made.
Delivery note is used when goods are transported by the seller’s means of transportation. It will show details of all the goods being delivered so that the goods when finally arrived can be checked against goods listed on the delivery note.
USES OF DELIVERY NOTE.
- Evidence of delivery.
- To confirm arrival of goods.
- It is used when goods are transported by the seller’s means of transportation.
DELIVERY NOTE
Ambra Bookshop,
Iyana Ipaja.
Date……………..
Alex Bookshop,
Baale, Ajegunle.
Please receive your order.
| S/N | Description | Qty |
| 1. | Sharp Calculating Machines. Received the goods in good condition. | 500 |
Received by ………………………………..
Signature & Stamp
Issued by ………………………………..
Signature & Stamp
CONSIGNMENT NOTE
This is a document made out by sender of goods, handed over to the carrier and countersigned by the consignee on delivery as proof that delivery has been. When goods are transported by an independent carrier a consignment note is to be delivered. It shows details of goods sent.
USES OF CONSIGNMENT NOTE
- It is used when the seller engages an independent transporter.
- It shows details of goods sent.
- It states whether freight has been paid or not.
- Evidence of delivery when daily signed by consignee.
DEBIT NOTE
This is a document sent by the seller to the buyer to correct an under change in his account or when goods are not changed on invoice.
USES OF DEBIT NOTE
- To correct an under-change of invoice.
- Used to correct omission in the invoice.
- Used when some items dispatched has not been recorded in the original invoice.
- It informs the buyer that his account has been debited.
- Used as a supplementary invoice.
CREDIT NOTE
This is a document issued by one party to a transaction to the other to inform him that his account has been credited with the amount arising as a result of inadvertent over-change or goods charged have been returned. It is usually printed in red.
USES OF CREDIT NOTE
- To inform the buyer that his account has been debited.
- To correct an over-charge.
- Used when goods returned have been charged.
- Sent when the seller has decided to give allowance to the buyer.
- Used to show overpayment by the buyer.
CREDIT NOTE
Alaba Enterprise,
Agege.
1st Jan. 2006.
Garvick Bookshop
Ojora Ajegunle
Lagos.
| DATE | PARTICULARS | AMOUNT |
| 29th December, 2005 | 10 Pieces of Casio Calculating Machine | 15,000 |
| Less 10% discount | 1,500 |
RECEIPT
This is an acknowledgement of receipt of money from the buyer by the seller. It is a document which confirms that payment has been made.
CONTENTS OF RECEIPT
- Name of the buyer.
- Quantity of goods bought.
- Total amount paid in words and figures.
- Signature of the sellers and buyers.
USES OF RECEIPT
- Bonifide title to ownership of property.
- Confirmation of payment.
- Used in auditing processes.
- Sources of information for cash book.
- States the total amount received.
- Shows date in which payment is made.
RECEIPT
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA
OFFICIAL RECEIPT
Date: _________________ Ms: _________________
Name: _____________________________________________________________
Amount in words: ____________________________________________________
Purpose: ___________________________________________________________
Cash/Cheque: _______________________________________________________
Cashier’s signature: __________________________________________________
Serial No: ICAN RB01
STATEMENT OF ACCOUNTS
This is a document showing the state of one person’s account with another. It summarizes recent invoices, payments and shows the amount owed at the end of the period to which the statement applies. The seller regularly sends it to the buyer showing detail transactions between them and the amount paid and the outstanding one.
USES OF STATEMENT OF ACCOUNTS
- It shows charges commission and interest passed to a customer’s account.
- It shows the terms of payment for amount due.
- It shows the unpaid balance.
- It shows the amount of purchase made.
- It enables a customer to have a thorough check of what he has purchased.
- It gives the customer an idea as to his financial standing at a given period.
Statement of accounts for the month of July.
System Bookshop,
Baale, Ajegunle.
10th July 2006.
Olayemi Enterprise
Iyana Ipaja
Lagos.
| Date | Details | Debits | Credit | Balance |
| # | # | # | ||
| July 1 | Bal. b/f | 10,000 | ||
| July 3 | Rulers | 1, 000 | 11,000 | |
| July 4 | Big notes | 2,000 | 13,000 | |
| July 6 | Cash | 6,000 | 7,000 | |
| July 10 | Cash | 500 | 6,500 |
Accountant.
ASSIGNMENT
- Differentiate between commodity and stock
- State the benefit of commodity exchange
See also
ECONOMIC GROUPINGS IN WEST AFRICA