Investigating the flow of financial documents 2

1
Investigating the flow of financial documents 2
2
The sequence of documents

• Stage 2 payment notification
• Seller makes out invoice listing goods, price,
  discounts and VAT
• Credit note is issued if any goods are returned
• End of month seller issues statement of account
  listing all transactions and balance owing. May
  include remittance advice slip for buyer to
  return with payment

3
The invoice

• To Jones and Kelly
• Riverside Walk
• HIGHTOWN HG2 8PP

4
The invoice key points

• Always on headed paper
• Invoice shows VAT registration number
• All items listed separately, then totalled
• VAT added to sub-total to give total due
• Terms date when payment due
• E OE errors and omissions excepted gives
  firm right to amend errors later.

5
VAT key points

• VAT value added tax
• Charged on most goods/services sold
• Current rate 17.5 but Government can change
  rate
• Businesses pay VAT to suppliers and collect VAT
  from customers. They pay the difference to HM
  Customs Excise
• Small scale businesses do not have to do this
  but still have to pay VAT on purchases

6
Credit note

• To Jones and Kelly
• Riverside Walk
• HIGHTOWN HG2 8PP

7
Credit note key points
Only issued when there is a problem and a refund
is required, eg

• Goods damaged
• Incorrect goods delivered and returned
• Fewer goods delivered than charged on invoice
• Overcharge on invoice

8
Statement of account

• To Jones and Kelly Customer a/c no 789
• Riverside Walk Credit limit 10,000
• HIGHTOWN HG2 8PP Date 30 June 2002

9
Statement of account key points

• Sent at end of month
• Starts with any amount owing from previous month
• All invoices add to amount owed
• All credit notes and payments reduce amount owed
• Final column shows balance after each transaction
• Ends with current amount due
• May include remittance advice for payment

10
Remittance advice

• From Jones and Kelly Customer a/c no. 789
• Riverside Walk
• HIGHTOWN HG2 Statement date 30/6/02
• Amount enclosed Cheque no.
• Your ref Date of payment

11
Remittance advice key points

• Often tear-off form at end of statement
• Customer includes form with payment
• Supplier can immediately link payment to
  customer and statement.

12
The sequence of documents

• Stage 3 making payment
• Buyer checks invoice and statement
• If correct, normally pays by cheque.

Note receipts may be issued by seller if cash
payments are received for any reason
13
Cheques key points

• Cheques printed by banks
• Business cheques include company name
• May be completed by hand or printed by computer
• Items completed are date, payee, amount in words
  and figures
• Cheques for large amounts signed by more than one
  person
• Counterfoil states reason for payment

14
Cash sale receipt

• EASYPRINT MAIN STREET HIGHTOWN
• Name John Smith Receipt no. 123
• Address 2 Windy Road Date 10 June 2002
• Hightown
• 50 coloured photocopies 5.50
• VAT _at_ 17.5 0.96
• Total paid 6.46
• Received by Paula King

15
Cash sales receipt key points

• Proves amount was paid
• Should be kept safely in case goods faulty
• Normally only issued for cash payments not
  required for cheque payments

16
Computerised accounting packages

• Used by most businesses to
• Calculate and print invoices, credit notes and
  statements
• Pay suppliers, including printing cheques
• Keep records of all transactions including VAT
• Produce reports, such as overdue payments
• Monitor the bank balance