Hello welcome to this blog on types of business documents, meaning and thier uses.
Meaning of business documents
Commercial document are official papers which facilitates the act of buying and selling of goods. All business transactions must be backed by relevant documents in order to show authenticity as well as for record purposes.
Types of business documents
The various types of commercial documents currently in use are as follows:
- Trade journals
- Later of enquiry
- Catalogue and price list
- Quotation
- Order
- Invoice
- Delivery note
- Advice note
- Consignment
- Credit note
- Debit note
- Statement of account
- Receipts
Trade journals
Trade journals are publications which serves as source of information to the buyer as it contains articles on matters of interest to people in a particular trade. Trade journals contain information about price, terms of payment, terms of sales and delivery. The description of goods will also be shown in the journal.
Letter of Enquiry
Letter of inquiry is written by the buyer to the producer or supplier asking for information about certain goods which are for sale, amen delivery and other relevant information before the buyer decide on one particular producer and what to buy. The prospective buyer may request for the price list of the goods.
Uses of letter of enquiry
- Sent by the buyer to the seller to find out about the availability of goods, their prices and the terms of payments.
- It informs the seller of the goods required, the quantity, the time and the terms of delivery.
Catalogue: Catalogue is a pictorial presentation of goods and articles available for sale, especially in mail other business. It is a medium of advertising.
Uses of catalogue
- It is used to inform the buyer of the details of the goods, as to size, colors, prices and delivery terms.
- It can also be used as a quotation or reply to enquiry.
Price list: The price list shows the current prices of the various products of a firm.
Uses of price list
- It is sent by a wholesaler to retailer to inform him of details of goods, such as prices and delivery terms.
- It is used by retailer to compare terms of different wholesalers.
- It also guides the customer in making a choice.
Quotation: Quotation is a statement prepared by a supplier of goods or services for a particular order which shows the current price and terms of trade. Quotation is applicable to a particular transaction only. The supplier we send it to show the price to be charged, terms of payment and period of delivery. It is usually sent as a reply to an enquiry.
Uses of quotation
- Quotation is used as a reply to an enquiry
- It’s you also shows the amount of price of the goods
- It shows the terms of trade.
Order: An order is a statement sent by the buyer to the seller, stating the full description and quantity of goods required. After the buy her has gone through the catalogue, he will then place an order. The order will show the goods required, the quantity, type, conditions of payment, purchases and method of delivery.
Uses of an Order
- Order is used to show the quantity of goods to be purchased.
- It also used to make purchase.
- Acceptance of an order signifies the beginning of a contract.
Invoice: Invoice is a commercial document used in business transaction, giving a complete or comprehensive summary of a transaction involving sales or purchases of goods. Most invoice bears the terms E & OE (errors and omissions expected). It is sent by the seller to the buyer to provide him the following information:
- List of goods bought and description
- Quantity of each purchase and price
- Charges for parking
- Means of transport
- Terms of delivery and payment
- Total amount expected from buyer and discount
- Discount granted
- Name and address of suppliers.
Uses of invoice
- It is a document showing details of goods sold
- It serves as a receipt
- It is used to write up the purchases/sales Journals.
Delivery note: Delivery note is a types of business documents document which usually accompanies the delivery of goods. It provides the buyer with the list of items in a particular consignment. It enables the goods to be checked by the buyer and to ensure they are delivered in good condition, especially when goods are delivered through the sellers means of transportation. Delivery note is usually sent by the seller to the buyer for signature. When the buyer receive the goods, if they are correct, the buyer signs and retains one copy and return the other copy.
Uses of delivery note
- It is used to confirm the goods on arrival before it is filed for reference.
- It is used as evidence of delivery
- It is used when goods are transported by the wholesalers means of transport.
Advice note: Advice note is a document sent by this supplier to the buyer, informing him of the dates on which the listed goods were dispatched and the means of transportation employed. It is usually sent to reach the purchaser ahead of the goods which are sent through the Rail. Advice note will provide information on when and where to expect the goods sent.
Uses of advice note
- It is used to inform the buyer that is goods are on the way.
- It is used to show the mode of transport used.
- It is used to inform the consignee of The likely time the goods should arrive.
Consignment note: Consignment note is a document supplied 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. The document after being completed by the sender is handed over to the carrier and signed by the consignee on the delivery of the goods, thus providing proof of delivery.
Uses of consignment note
- It is used when the wholesaler engages an independent transporter to convey the goods to the retailer.
- It is used to show details of goods sent.
- It is also used as evidence of delivery when dully signed by consignee.
Credit Note: Credit note is a document sent by the seller to the buyer to correct an overcharge. It arises because some goods which have been charged when returned as damaged or not as ordered. Hence, credit note is sent to a customer for reduction in the amount owed by him. To avoid confusion, it is usually printed in red.
Uses credit note
- Sent by the seller to correct and overcharge on an invoice.
- Sent when the buyer has returned some faulty goods to the seller.
- Sent when the seller has decided to give an allowance to the buyer.
Debit note: Debit note is a document sent by the seller to the buyer to correct an undercharge or when goods are not charged on the invoice. It is also referred to as supplementary invoice. Debit note is sent to the customer to increase the amount of charges on the invoice, hence increasing his indebtedness.
Uses of debit note
- Debit note is used to correct and undercharge
- It is used when the invoice is not well price
- It is also used when some items dispatched have not been documented in the original invoice.
- It informs the buyer that he’s account has been debited.
Statement of account: Statement of account is a types of business documents sent by the seller to the buyer at regular intervals to inform him of all transactions make during a particular period and their amount due. It usually shows credits and debits on the account and the balance due.
Uses of statements of account
- It enables the customer of a firm to have a Thorough check of what he has purchased.
- It also gives the customer and idea as to his financial standing at a given period.
- The information in it is used by Bank customer to prepare a bank reconciliation statement.
- The customer can use it to check the accuracy of the entries.
- It shows the balance due for payment.
- It shows the amount of goods bought and payment made.
- It is a request to pay
- It draws attention to accounts which are overdue.
Pro-forma invoice: A pro-forma invoice is an invoice that is usually submitted before goods are dispatched as a polite request for payment to be made in advance when A seller is not willing to sell on credit and to show the goods. If the goods are retained, it becomes an ordinary invoice.
Uses of pro-forma invoice
- It is used to serve as a quotation.
- It is used when goods are sent on approval to a customer.
- It is used when dealing with the customer for the first time, as a polite way of refusing credit.
- It is used as a reply to inquiries.
- It is used when goods are sent to an agent to be sold.
- It states the terms of sales.
- It is used in foreign trade when goods are exported on consignment, stating the price of goods.
Differences between ordinary invoice and pro-formal invoice
- Ordinary invoice is used as an evidence of credit sale why pro-forma is used when the seller did not want to sell on credit.
- Ordinary invoice is always sent with the goods why proforma invoice can be sent without the goods.
- Ordinary invoice is not used to provide information but to confirm sales while performer invoice can be used when the buyer needs information from the seller on terms of sales.
Receipts: Receipt is a document which acknowledges that payment has been received from the buyer. When the customer receives the goods and he sent the money to the seller who in turn issues the receipt as evidence of payment. It must be written and signed by the seller and send to the buyer, stating the actual amount received.
Uses of receipts
- It serves as evidence of payment.
- It states the actual amount received and who received it.
- It shows the date of payment.
- Receipt is used for auditing purpposes.
Revision Questions
- Give two uses of each of the following document in business transaction (a) proforma invoice (b) advice notes (c) credit notes (d) statement of account (e) receipts.
- Explain the following types of business documents (a) delivery notes (b) consignment note (c) order (d) quotation.
- (a) Distinguish between credit note and debit note (b) state three uses of credit note and two uses of debit notes.
- Give two uses of each of the following types of business documents (a) price list (b) delivery note (c) consignment note (d) advice note (e) proforma invoice.