Business documents

Commerce SSS3 First Term

WEEK 2

Business documents

Performance Objectives

The student should be able to:

        1. Describe essential business documents.

     2. Explain the meaning of trade terms.

 Content

Essential Business Documents

Letter of Inquiry

The inquiry is usually the first stage in a transaction. It is sent by a potential buyer to a seller, or many sellers, requesting information, prices and delivery terms related goods or services required. The enquiry may a letter or it may be standard printed form on which the information required can be filled. An alternative way to receive quotations is to invite tenders, i.e. offers of supply from any number of firms interested in supplying whatever is required. A tender is a competitive quotation one submits in competition with other potential suppliers. Tenders may be invited by advertising an interest in receiving open quotations, or bids, in competition with others.

Invoice

An invoice is a form in which the seller lists the items sold to a buyer. The following particulars are usually contained in an invoice:

1. Name and address of the supplier or seller

2. Date and reference number of the invoice

3. The goods sold and their prices

4. Discount granted and other trade terms

5. Total amount payable on the invoice including taxes if any

6. Signature of the seller

An ordinary invoice is used along side with the goods. An invoice is sent without goods accompanying it (in advance of the goods) is called a pro forma invoice. It is sent under the following circumstances:

I. When the sellers insist that buyer pays before the goods are delivered to them.

ii. When the buyers need the particular of the goods he wants to buy in order to clear some custom formalities.

iii. When the buyer does not place an order for the goods but the seller wishes to explore his readiness to buy.

Receipt

A receipt is a written acknowledgement of money received. When the buyer receives goods and is satisfied with the details as contained in the invoice, he remits the money due on the invoice. On receiving the money, the seller sends a receipt tom the buyer as evidence that the goods have been paid for. A receipt usually contains the following important particulars:

1. Name of the issuer (seller)

2. Date and reference number

3. Name of the payer(buyer)

4. Reason for the payment

5. Amount of the payment in word and figures

6. Signature of the receiver of the payment.

Quotation

A quotation is sent to the potential buyer by the firms interested in supplying the goods. Where it is not possible to quote a precise price, the seller will quote an estimate or expected cost. A quotation will also give details of discounts offered:

i. Trade discount: Given to people in the same trade as the seller to enable them to make a profit on resale

ii. Quantity discount: This is given to encourage the buyer to place a large order, a lower price will be offered for a larger order.

iii. Cash discount: It is given to encourage prompt payment

Advice Note

A document sent by the supplier to the buyer informing him of the date on which the listed goods were dispatched and the means of transportation. It has the following uses.

1. It is used to inform the buyer that their goods are on the way.

2. It is used to show the mode of transport used.

3. It is used to inform the consignee of the likely time the goods would arrive etc.

Consignment Note

A document given to a carrier when goods are to be sent from one place to another. It gives details of the goods, number of packages, weight, name and address of the sender and consignee. Its uses include;

1. It is used when the wholesaler engages an independent transporter to convey the goods to the retailer

2. Shows the details of the goods.

3. It is used as an evidence of delivery when duly signed by the consignee.

Credit Note

This is the process where a customer is overcharged for the goods he/she bought from the buyer. If the invoice has charged the customer N200 instead of N190. This means the customer has been overcharged by N10. In this case, the seller will sell a credit note of N10 to the buyer (customer).

Other essential business documents include;

1. Trade journals

2. Catalogue and price list

3. Delivery note

4. Statement of account

5. Debit note

Trade Terms and Abbreviations

These are various terms and abbreviations commonly used in commerce. They include:

1. Discount: Discount can be defined as the reduction in the price of goods to encourage bulk purchases and prompt payment. There are various types of discount, namely:

a. Cash discount

b. Trade discount

c. Seasonal discount

d. Quantity discount  

2. Carriage paid: A price quotation for goods in which the seller bears all delivery and transportation charges.  

3. Ex-warehouse: A quotation of the price of a commodity which excludes all delivery charges.

4. Carriage forward: It signifies that the buyer is responsible for the payment of carriage when he received the goods dispatched by the seller.

5. Ex-works: This means that the buyer is responsible for all delivery charges except loading unto the road or rail vehicle for which the seller is responsible.

6. C/F (cost and freight): This includes freight charges, which may even include overseas delivery.

7. CIF (cost insurance and freight): It includes the cost of insurance while goods are in transit.

8. FAS (free alongside ship): Price includes delivery to a ship, but does include loading charges.

9. FOB (free on board): Cost includes freight charges, including loading on to a ship.

10. FOR (free on rail): As in the case of FOB but it includes loading onto a rail wagon.

11. FOQ (Free on Quay): Price includes only delivery to the quay for shipment.

12. Franco: This means that the price quoted includes the cost of insurance, freight and all delivery charges to the importer’s warehouse.

Some Special Abbreviations

1. A/C -  Account current

2. ADV - Advertisement

3. Amt  - Amount

4. a/o - Account of

5. A/P - Account payable

6. Approx - Approximate

7. A/R - Account receivable

8. A/S - Account sale

9. Bal bring (brought) down

10. B/D -  Bank draft

11. B/E - Bill of exchange

12. B/F - Brought forward

13. B/P - Bill payable

14. B/R - Bill receivable

15. T.D - Estimated time of departure

16. Div - Dividend

17. D/Y - Delivery

18. T.A - Estimated time of arrival

19. P.T - Estimated time tax

20. E -  Errors Excepted

21. N -  Dispatched note

22. E & OE -  Error and omission expected.