Documents Used in Home Trade 2

Functions of an advice note

a) Informing the buyer that the goods are on the way so that in case of any delay in delivery, the buyer can make inquiries.

b) Alerting the buyer so that necessary arrangements can be made for payments when the goods arrive.

c) Can serve as an acknowledgement note, where one is not sent/.

iii) Delivery note This is a document sent by the seller to the buyer to accompany the goods being delivered.

-A delivery note is always made in triplicate (3), one copy remains with the seller and two sent to the buyer.

-When the goods reach the buyer, he/she confirms that the goods are the ones ordered for and that they are in the right condition by comparing the delivery note, the order and the goods.

If the buyer is satisfied with the goods, he/she signs the two copies, retains the original and send the copy back to the seller.

This serves as evidence that the goods have been received in the right condition and in the right quantities.

-Some businesses keep delivery books in which the buyer signs to indicate that goods have been received in good condition. A delivery book is used by the seller if he/she delivers goods by himself/herself as an alternative to a delivery note.

The content of a delivery note includes the following;

a. Name and address of the seller

b. Name and address of the buyer

c. Date of delivery

d. Delivery note number

e. Description of the goods delivered

f. Quantities of the goods delivered

g. Space for the buyer to sign and comment on the condition of the goods received.

iv) Consignment note

This is a document prepared by a transporter to show that he/she has been hired to deliver specified goods to a particular buyer.

This document is used when goods are delivered to the buyer by public means of transport e.g. by trains.

-The seller is the consignor, the buyer is the consignee and the goods the consignment

-The transporting company prepares the consignment note and gives the seller to complete and sign. The seller then returns the note to the transporter (carrier) who takes it together with the goods to the buyer.

-On receiving the goods, the buyer signs the consignment note as evidence that the goods were actually transported.

The content of a consignment note includes the following;

Details of the goods to the transported

Name address of seller (consignor)

Name and address of buyer (consignee)

Terms of carriage and conditions of transporting the goods

The transportation cost

Handling information

Destination of goods

v) Goods Received note; This is a document sent by the buyer to the seller to inform him/her that goods sent have been received.

It usually prepared in duplicate, the original is sent to the seller and the copy retained by the buyer.

The contents of the goods received note include;

Date of the document

Name and address of the buyer

Name and address of the seller

Corresponding purchase order

Details of goods received

Date the goods were received.

vi) Returned goods note/Damaged goods note; If goods are damaged on the way, the buyer may return them to the seller.

The buyer may also return goods for other reasons e.g.

Wrong type of goods

Excess goods

Wrong quality goods

-When the goods are returned, the buyer informs the seller of the return by sending a goods returned note.

-A goods returned note is a document sent by a buyer to a seller to inform him/her that certain goods are being returned to the seller.

-Where the goods are returned because of damage, the note may be referred to as the damaged goods note.

The contents of the goods returned note include;

Details of goods that have been returned to the seller

Date goods are returned

The number of (GRN)

Order number

Delivery number

Name and address of both buyer and seller

-When the seller receives the note together with the goods, he issues a credit note

d) Documents used at the invoicing stage

This stage involves the seller requesting or demanding for payment from the buyer for the goods or services delivered.

Some of the documents used at this stage include:

a) Invoice

This is a document sent to the buyer by the seller to demand for payment for goods delivered or services rendered.

There are two types

of invoices namely:

a) Cash invoice

This is sent when payment is expected immediately after delivery thus acting as a cash sale receipt

b) A credit invoice

This is sent when a buyer is allowed to pay at a later date.

Functions of an invoice

i) It shows the details of goods sold i.e. quantity delivered, unit price, total
value of the goods and terms and conditions of sale.

ii) It is a request to the buyer to make payment

iii) It serves as an evidence that the buyer owes the seller a certain amount of money

iv) It is used as a source document in recording the transaction in the book of accounts.

The contents of an invoice include the following:

Invoice number

Name and address of the seller

Name and address of the buyer

Date document is prepared

Details of goods repaired

Unit prices of goods delivered

Total value of goods

Discounts offered

E and O.E printed at the bottom

The letters E and O.E (Errors and Omissions Excepted) means the seller reserves the right to correct any errors and omissions made in the invoice.

-On receiving the invoice, the buyer verifies the contents using the local purchase order and the delivery note.

If the invoice is in order, the buyer makes arrangements to pay the amount stated.

Businesses which offer services issue a document called a bill, which serves the purpose of an invoice.

Differences Between the invoice and pro-forma invoice

The invoice The pro-forma invoice
1) It is issued after goods and
services have been delivered

2) It shows the total value of the
goods or services on credit

3) It is used to demand payment
for products sold on credit

4) Used as a basis for making
payment for products already bought

5) Serves as a notice of payment
for products bought on credit

The pro-forma invoice

1) It is issued before goods and
services have been delivered

2)Shows the total value of goods
and services to be bought

3)It is used to demand for payment
in advance for products to be
bought

4)Used as a basis for preparing
payment for products not yet
bought

5) Serves as a Quotation for
products to be bought.



b) Credit note

This is a document sent by the seller to the buyer (credit buyer) to correct an overcharge.

It is used to inform the buyer that the amount payable by him/her has been reduced
An overcharge is an excess amount charged beyond the right price.

Causes of overcharge may include;

Arithmetical errors like wrong addition

Price overcharges

Inclusion of wrong or unordered items in the invoice

Failure to deduct the allowable discounts

Return of goods (damaged goods)

Failure to note the return by the buyer of packing cases or containers used to deliver goods to him/her

Use of wrong price list.

The purpose of the credit note is to reduce the total invoice amount by the amount of the overcharge.

-A credit note is usually printed in red to distinguish it from other documents.

Contents of a credit note include;

Name and address of the seller and the buyer

Credit note number

Date document is prepared

Description and value of goods returned by buyer (in case that was done)

Total overcharge

Reasons why a seller would send a credit note to a buyer/circumstances under which a credit note is sent to a buyer.

When there is an overcharge in an invoice

When the original invoice had indicated items that were not supplied

When the buyer returns empty cases/crates that had been charged in the invoice.

When the buyer returns some goods to the seller

If the buyer was entitled to a discount which was not given or taken care of in the invoice.

c) Debit note

This is a document sent by the seller to the buyer to correct an undercharge on the original invoice.

It is used to inform the buyer that the amount payable by him has been increased.

-A debit note acts as an additional invoice.

-An undercharge arises when amount charged on products is less than their right price.

Documents Used in Home Trade Page 1 | Documents Used in Home Trade Page 2 | Documents Used in Home Trade Page 3 | Documents Used in Home Trade Page 4 | Documents Used in Home Trade Page 5 | Documents Used in Home Trade Page 6