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Business Transactions and Documentation


 
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Business transactions and documentation

In every business a number of transactions and events will take place every day. The role of financial reporting is to effectively measure the effects of those transactions and events, record the effects on the business and summarise those transactions and their consequences in a format that is useful to the users of the financial statements.

The main transactions that take place include sales, purchases (of goods and of services) and payroll related transactions. Others include rental costs, raising finance, repayment of finance, and taxation related costs to name but a few. All of these transactions must be adequately captured by the financial reporting system.

With most transactions a supporting document will be created to confirm the transaction has taken place, when the transaction took place and the associated value of the transaction. This documentation is vital to the financial accountant, who uses the information on the documents as a data source to initiate the measurement and recording of the transactions.

The table below summarises the main types of business documentation and sources of data for an accounting system, together with their content and purpose.

 

Contents

Purpose

Quotation

Quantity/description/details of goods required.

To establish price from various suppliers and cross refer to purchase requisition.

Purchase order

Details of supplier, e.g. name, address. Quantity/ description/details of goods required and price. Terms and conditions of delivery, payment, etc.

Sent to supplier as request for supply. To check to the quotation and delivery note.

Sales order

Quantity/description/details of goods required and price.

Cross checked with the order placed by customer. Sent to the stores/ warehouse department for processing of the order.

Despatch note (goods despatched note – GDN)

Details of supplier, e.g. name and address. Quantity and description of goods

Provided by supplier. Checked with goods received and purchase order.

Goods received note (GRN)

Quantity and description of goods.

Produced by company receiving the goods as proof of receipt. Matched with delivery note and purchase order.

Invoice

Name and address of supplier and customer; details of goods, e.g. quantity, price, value, sales tax, terms of credit, etc.

Issued by supplier of goods as a request for payment. For the supplier selling the goods/services this will be treated as a sales invoice. For the customer this will be treated as a purchase invoice.

StatementDetails of supplier, e.g. name and address. Has details of date, invoice numbers and values, payments made, refunds, amount owing.Issued by the supplier. Checked with other documents to ensure that the amount owing is correct.

Credit note

Details of supplier, e.g. name and address. Contains details of goods returned, e.g. quantity, price, value, sales tax, terms of credit, etc.

Issued by the supplier. Checked with documents regarding goods returned.

Debit note

Details of the supplier. Contains details of goods returned, e.g. quantity, price, value, sales tax, terms of credit, etc.

Issued by the company receiving the goods. Cross referred to the credit note issued by the supplier.

Remittance advice

Method of payment, invoice number, account number, date, etc.

Sent to supplier with, or as notification of, payment.

Receipt

Details of payment received.

Issued by the selling company indicating the payment received.

 The above list is based upon the documents created by a traditional manufacturing company. Not all companies will produce all of these documents. In the same manner some companies may produce alternative forms of documentation, particularly if they operate in the services industry or overseas

Created at 10/23/2012 1:09 PM  by System Account  (GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London
Last modified at 11/30/2012 11:00 AM  by System Account  (GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London

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ACCAPEDIA - Business Transactions and Documentation