Bright Acres Farm posts a cheque to its feed merchant and encloses a slip listing the three invoice numbers that the payment covers, so that the merchant kn...
Question 1 Report
Bright Acres Farm posts a cheque to its feed merchant and encloses a slip listing the three invoice numbers that the payment covers, so that the merchant knows exactly which items on its monthly statement have been settled. Identify the enclosed slip.
Answer Details
The slip tells the merchant which invoices the enclosed cheque is meant to settle, so the merchant can tick the right lines off its statement of account. That is a remittance advice. It is issued by the payer, travels with the payment, and is a memorandum only: the accounting entry comes from the cheque itself through the cash book.
A statement of account travels the other way, from supplier to customer, and shows what is owed rather than what is being paid. A credit note reduces a debt after a return. A paying-in slip is used at the bank when money is deposited into the farm's own account, so it never leaves the business for the merchant.
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