BUSINESS DOCUMENTS
- Entries in the accounting records are made using business documents.
- Business documents can either be issued or received by the business.
1. Invoice
- An invoice is a document issued by the seller to a buyer for goods supplied on credit.
- When a business sells goods on credit it will issue an invoice to the purchaser containing the
following information:
a) The name and address of the supplier.
b) The name and address of the customer.
c) The date.
d) Invoice number.
e) Full details, quantities and prices of goods supplied.
- Sometimes the supplier allows the customer trade discount.
- A trade discount is a reduction in the price of goods.
- A trade discount is given to businesses in the same trade to enable them to make profit when
they sale the goods.
- It can also be given to customers to encourage them to buy in bulk.
Example of an invoice
Sew and Sew is a curtain making business situated at No 92, Samora Machel in Harare. On 3 April 2009
goods were purchased from the Weaving shade situated at No 14 Industrial Street in Harare. The goods
purchased were as follows:
- 30 metres Brocade fabric design @$15 per metre.
- 10 metres Polycotton fabric @$6 per metre.
The supplier allowed customer 20% trade discount and the terms of the invoice were 2.5% cash discount
if paid by 31 May 2009.
Invoice
From: ___________________________
_________________________________
_________________________________
To: ________________________________
________________________________
________________________________
Date Order No. Account No. Invoice No.
Qty Description Product Unit Price Total
code
Delivery
Sub-total
Terms: less _ _% trade
discount
Cash discount __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Total (net price)
_
E & OE
Difference between Cash discount and Trade discount
- Cash discount is not deducted on an invoice. It is only allowed if the invoice is paid within a set
time limit, but trade discount is shown as a deduction on an invoice.
2. Debit note
- A debit note is a document issued by the customer to the supplier informing him of any
shortages, overcharges and faults
- It contains the following information:
a) Name and address of the supplier.
b) Name and address of the customer.
c) The date.
d) Full details and quantities of the goods (and sometimes the prices) of the goods returned or
overcharged.
- When a buyer returns goods to the supplier he will send a Debit note together with the goods
informing him that his account in the buyer’s books will be debited.
- Upon receiving the debit note the seller will send a buyer a credit note.
- The credit note is an acknowledgement by the seller that the credit to the extent of the amount
mentioned has been duly passed to the customer’s account.
- Neither the supplier nor the customer makes entries in their accounting records in respect of a
debit note.
- A debit note is merely a request to the supplier to reduce the total of the original invoice.
Example of a Debit note
On 6 April Sew and Sew returned goods to the Weaving Shed and issued a debit note. The following are
the goods that were returned to the supplier:
- 10 metres polycotton fabric because the wrong colour was supplied.
Debit note
Number 29
Debit note
Sew and Sew
92 Samora Machel Ave
Harare
The Weaving Shed
14 Industrial Street
Harare 6 April 2009
The following goods has been returned:
Price Amount
$ $
10 Metres Polycotton fabric 6 60 00
Less 20% Trade Discount 12 00
48 00
Reason for return- Wrong colours supplied
Please issue a Credit Note
3. Credit Note
- It is a document issued by the business providing details of goods returned by a customer.
- It is issued by the supplier when goods are returned, reported faulty or where there has been an
overcharge on an invoice.
- It contains the following information:
a) Name and address of the supplier.
b) Name and address of the customer.
c) Date.
d) Full details, quantities and prices of goods returned or overcharged.
- To distinguish them from invoices credit notes are sometimes printed in red.
- The customer receives the original credit note and uses it to record the purchases returns.
- The supplier keeps a copy of it and uses it to record the sales returns.
Sample of a credit Note
On 6 April 2009 Sew and Sew returned goods to the Weaving Shed and issued a Debit Note. The
Weaving shed issued the following Credit Note to Sew and Sew on 9 April 2009.
CREDIT NOTE: _ _ _ _ _ _
From: ___________________________
_________________________________
_________________________________
Qty Description Product code Unit Price Total
Reason for credit: Sub-total
_________ ___ __ less _ _% trade discount
Total (net price)
4. Statement of Account
- It is a document which shows a summary of transactions for the month.
- It contains the following information.
a) Name and address of the supplier.
b) Name and address of the customer.
c) Date.
d) The balance owing at the start of the period.
e) Invoices and credit notes issued.
f) Payments received.
g) Any discount allowed.
h) The balance owing at the end of the period.
Sample of a Statement of Account
The weaving shed issued the following statement of account to Sew and Sew on 30 April 2009.
STATEMENT OF ACCOUNT
From: ___________________________
_________________________________
_________________________________
Account: _______________________________
Accountholder:__________________________
_________________________________________
Statement date: _________________________
Date Details Debit Credit Balance
*
Terms:
_____________________
_____________________
* Dr = debit / CR = credit
5) Cheque
- A cheque is a written order to a bank to pay a stated sum of money to the person or business named
on the order.
6) Receipt
- A receipt is a written acknowledgement of money received and acts as proof of payment.
