A2 Financial Documents
A cash receipt is a printed record of payment for goods and services using cash or equivalent. The customer can keep the receipt as proof of purchase. They may use this if they want to return the product. The business should keep this receipt for accounting purposes.
A cheque is a small document that contains a written instruction for a bank to take money out of a person or business’ bank account and transfer it to the bank of the person or business the cheque is written to. Individuals and small may have a cheque book that they use to handwrite cheques. Larger businesses may do a ‘cheque run’, which involves printing batches of cheques and getting them authorised by budget holders.
A purchase order is a document created by a business when they want to buy goods or services. The order lists the items they wish to purchase at the price they have agreed to pay. It is authorised by the budget holder which makes it a legally binding document. Once the purchase order is received by the supplier, the buyer is legally obliged to pay. When the supplier confirms receipt of the purchase order, they are legally obliged to provide the goods and services. When goods are delivered, staff can check the deliveries against their purchase order to ensure it is correct. When the invoice is received, staff can check the invoice amount against the amount agreed on in the purchase order.
A delivery note (goods received note) is a document that is presented to a buyer when goods are received. The document lists the contents of deliveries. The receiver can check the delivery note against the content to ensure everything has arrived. They can also check the delivery note against the purchase order to ensure that the delivery is what was requested. The receiver will usually be asked to sign the note which is returned to the supplier to confirm the delivery as accepted. The buyer will be given a copy of this.
An invoice is a document presented by a supplier to a customer to request payment. It should itemise goods and services received, the prices of each and the terms of sale. The buyer can check the invoice items against the purchase order and delivery note before authorising payment.
A credit note is a document used to amend any mistakes made in invoices. Legally, once an invoice is issued, it cannot be deleted from records. Auditors will need to see evidence of every invoice and any corrections made by credit notes. Mistakes in invoicing may include misprinting of the amount due, error in discounts given and returned items that are not to be paid for. Credit notes may be issued for all or part of an invoice. If an invoice is already paid and it is from a regular supplier, the buyer may decide to save the credit note to use to offset future payments.
A debit note is a document sent from a supplier to a buyer to inform them of their current debt obligations. The supplier will keep accounting records for each customer and once a shipment has been dispatched, they will debit the customer’s account in their own records. The debit note is to inform customers of this. As this is informative rather than a request for payment, it is not an invoice. Buyers may also issue credit notes to suppliers when returning items. This will be matched with a credit note from the supplier once issued.
A statement of account is a document issued by a supplier which details all transactions with a customer in a specified time period. The statement will include details of all invoices and credit notes issued within that time period. Details include invoice dates, numbers and amounts. This can act as a reminder to customers of any outstanding payments.
A remittance advice is a short letter from the customer to the supplier to confirm that payment has been made. This may be attached to a cheque, as a separate document if an electronic payment is made or sent via email. The remittance advice will usually include the invoice number the payment relates to, cheque number if paid by cheque or payment reference if a bank transfer is used. Remittance advices are not compulsory but some businesses send them out of courtesy as it makes accounting easier to monitor.
