(a) Give two uses of each of the following documents in business transaction. (I) Proforma invoice (ii) Advice note (iii) Credit note (iv) Statement of acco...
Question 1 Report
(a) Give two uses of each of the following documents in business transaction.
(I) Proforma invoice
(ii) Advice note
(iii) Credit note
(iv) Statement of account
(v) Receipt.
Answer Details
Two uses of each business document
(i) Proforma invoice
- It is sent to a prospective buyer to quote the price and terms of goods before an order is placed.
- It is used when goods are sold on cash-with-order terms or to enable the buyer arrange import documents and foreign exchange.
(ii) Advice note
- It informs the buyer that goods ordered have been dispatched and are on the way.
- It enables the buyer to prepare to receive and check the goods on arrival.
(iii) Credit note
- It is issued by the seller to reduce the amount a buyer owes, for example when goods are returned or overcharged.
- It corrects an over-invoiced amount and adjusts the buyer's account in his favour.
(iv) Statement of account
- It summarises all transactions (invoices, credit notes and payments) between buyer and seller over a period.
- It reminds the buyer of the balance owed and serves as a request for payment.
(v) Receipt
- It serves as proof or acknowledgement that payment has been made and received.
- It is used as evidence in settling disputes and for keeping proper accounting records.
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