BUSINESS

DOCUMENTS -
TYPES
TYPES OF BUSINESS
DOCUMENTS
Recording information about business transactions
can often involve significant writing or inputting data
into a computer.

Businesses have therefore developed special

paper or computerised documents for record
keeping to make the process less time-
consuming and to ensure that the relevant
information is recorded in the same format for
each transaction, regardless of who records it.
Some of the most frequently used documents in business
to record transactions are purchase requisitions, pro-
forma invoices, purchase orders, invoices, credit notes,
debit notes, statement of accounts and stock cards.

The style and layout of business documents will vary

from one business to the next, but the key general
information included should be the same.
 PURCHASE REQUISITION
A purchase requisition is an internal business document used to inform
the relevant persons (purchasing staff, managers, finance personnel) in a
business that a purchase is being requested.

These relevant persons have purchasing authority or responsibility for how

money is allocated or used so their approval is necessary before purchases
can be made.

Purchase requisitions should state the items and quantities being

requested, the expected price and supplier(s) of the items, the
departments requesting the purchase, the objectives hoped to be achieved
by the purchase and which department is paying for the purchase, etc.
Once approved, the
purchase requisition
leads to the next stage
of the purchasing
process which is the
purchase order.
 How much do you remember so far?

Look again at the purchase requisition form sample shown in the

previous slide and answer the following questions:
1.Which department is requesting the purchase?
2.Who is the contact person from the department in the event there are any queries or
concerns?
3.Who gave approval on behalf of the department for the purchase?
4.What is the department’s budget for this purchase?
5.Is it a special purchase or a recurrent purchase?
6.Does the purchase requisition form provide the quantity, unit price and total price of each
item?
7.Who is the vendor or supplier?
8.Are delivery details provided?
9.Is the grand total within the department’s budget for the purchase?
10.Who granted purchasing approval on behalf of the company?
 PRO FORMA INVOICES

The Purchasing
Department will request A pro forma invoice is an
The supplier will send back
information from the estimate or quotation, also
a pro forma invoice in
potential supplier about known as a preliminary bill
response.
products, quantities and of sale.
prices.

The pro forma invoice is sent to

the buyer before goods are
It itemises the products or services
actually delivered, so it allows the
a supplier is willing to deliver to a
buyer to determine whether they
customer at a specific price.
agree to purchase the items at the
prices specified.
 In situations where the buyer
is new or the seller does not
A pro forma invoice will also
It is therefore a useful trust that the buyer will pay
often include details
document to have for for goods after they have been
regarding the shipping
declaration of the value of delivered , the pro forma
process, such as packaging,
goods to Customs. invoice seeks to request
weight and delivery charges.
payment before goods are
delivered.

Only when the buyer agrees to

For accounting and record
purchase the products at the prices
keeping purposes, a pro forma
specified in the pro forma invoice,
invoice is not treated as an actual
and the goods are delivered, has a
sale.
sale being made.
 HOMEWORK
Design and create a pro forma invoice (using google doc/power point) given the
following information:
➢ Name of Business: Jamaique Computing Services
➢ Address: 422 Bob Marley Boulevard, New Kingston, Kingston 10
➢ Customer: Calabar High School
➢ Address: 61 Red Hills Road, Kingston 20
➢ Items: 2 desktop computers, three laptop computers, one printer, two
cartridges of printer ink and two reams of letter-size paper.
Be sure to include all elements of the pro forma invoice in your creation, including
prices.
 PURCHASE ORDER
A purchase order is the document issued to a supplier that stipulates
what is being purchased.

The purchase order typically has the supplier’s and buyer’s names,
date, product or service description, payment terms, freight terms,
delivery date and contractual references.

A purchase order is generally accepted as a legal offer which can be

accepted by the seller by supplying the requested goods/services.

To help with record keeping, the purchase order tends to keep the
same reference number as the preceding purchase requisition.
 INVOICE
An invoice is a document showing the details of goods bought or sold.

A seller sends an invoice to a customer.

To the seller, it is a sales invoice, but to the buyer it is a purchases invoice.

An invoice typically has:

▪ the name of the seller
• the contact information of the seller
• the name of the buyer
• the contact information of the buyer
• the date the goods/services were bought/used
• the date the invoice was sent
• invoice number
• the items and relevant quantities purchased
• The unit price and total cost of each item
• The total amount owned
• The terms of payment (30 days, discounts, etc).
For accounting and
record keeping
purposes, an invoice
represents that a
sale has been made.
 A credit note is a document sent by the seller to
the buyer indicating that the buyer’s
outstanding balance to the seller has been
credited or reduced.

CREDIT A credit note is used when:

NOTE
❖goods are returned by the buyer to the supplier
indicating that the buyer’s outstanding balance to the
seller has been credited or reduced.
❖the price on an invoice sent to the buyer was overstated
❖discount rates were not applied or applied incorrectly on
an invoice sent to the buyer
 DEBIT NOTE
A debit note is used when:
A debit note can be sent by
• The buyer was previously
the seller to the buyer undercharged
indicating that the buyer’s • The discount rate applied on the
outstanding balance has invoice was too high
been debited or increased. • The tax rate applied on the invoice
was too low
 STATEMENT OF
ACCOUNTS
A statement of account is a document sent by the seller to the buyer showing details of
transactions that occurred over a specified period.

This includes purchases made by the buyer, payments made during the period, returned
goods, any outstanding balance owed at the end of the period and payment terms.

A bank statement is an example of a statement of account that all account holders

receive periodically.
 A stock card is an internal business document used
for recording the movement of stock, also referred to
as an inventory card.

The stock control card typically shows the maximum

and minimum stock levels, purchases and sales of

STOCK stock and the corresponding balance of stock.

CARD
A stock card is a simple system for recording stock
that even small businesses can use.

It can be done manually, or it can be computerised.

The stock card provides the information
needed for effective stock control.

It is important for a business to monitor

and record change in stock levels to
ensure it does not run out of goods to
meet customer demand or materials
needed for production, as well as to
minimise storage requirements and cost.
 Import Export Bill of
license license lading

Trading Airway bill

Certificate Destination
of origin sheet
documents
Delivery
note
An import licence specifies exactly what is to be imported, and in
what amount.

Import
It is a document or permit giving permission for an organization to
import certain goods that are restricted or regulated in some way. licence

The importer has to apply for this licence or permit. There may be
quotas restricting the quantity of a particular product imported, or
there may be safety or environmental concerns regarding the
importation of particular items.
Many Caribbean traders,
manufacturers and service providers
need to import finished goods, raw
materials and/or semi-finished
goods for their businesses.
Import licences must be obtained
from the government
ministry/department responsible for
industry and trade.
The importation of goods and
services is closely monitored by the
State.
 These businesses are governed by
certain international standards in terms
NOTE: Franchises especially those in
of their products and services. For
the ‘fast food’ business, receive
example, the quality of their outputs
special consideration with regard to
and the quality of their service must
the importation of raw materials and
not deviate significantly from the
other products.
international standards of the parent
organizations.

Government therefore has to

give special consideration to
the needs of such businesses.
 Export
An export licence
license is a government
document that authorizes or
grants permission to conduct a
specific export transaction
(including the export of
technology).
Export licenses are issued by the
appropriate licensing agency after
a careful review of the facts
surrounding the given export
transaction.
Example of an export
licence
 Bill of lading
It provides the shipper with all
the necessary information to
process the shipment properly. The bill of lading is also
It serves three (3) main required as ‘evidence in
A bill of lading is a legally functions: claims for compensation
binding document for any damage, delay, or
• It is a document of title (ownership) of
traditionally used when the goods described.
loss during carriage and in
goods are traded. • It is a receipt for the received goods. the resolution of any
• It represents the terms and conditions disputes regarding
for the transportation of the goods. ownership of the cargo’.
The bill of lading shows:
• Exporter’s and receiver’s
names and addresses
• Date of shipping
• Description of items being
shipped
• Weight of the items
• Port of discharge
• Name of ship
• Freight charges
 Airway bill
An airway bill is a document
used when goods are traded
using air transportation.
It is evidence of the contract
between the shipper and the
air carrier.
It is not, however, a
document of title, like the
bill of lading.
The airway bill includes:
Exporter’s or shipper’s name and address
Importer or consignee’s name and address
Origin and destination airport
Value of goods
Number of packages
Weight
Description of goods
Special instructions: fragile/perishable
Charges applicable
 The duty on goods imported into a country varies
Certificate of origin from one country to another. Countries within a free
trade agreement share duties and tariffs on goods
from non-member countries, but exempt those that
are in the agreement.

A certificate of origin is a document used in

international trade as proof of origin of goods.

Certificates of origin usually accompany duty-free

goods to confirm that they were largely produced in
the exporting country to prevent non-member
countries from taking advantage of the free-trade
agreement that is in operation.
A destination sheet is a schedule
of deliveries to be made to
customers by a firm. The
destination sheet is utilised by
firms that make any deliveries.
These firms therefore control a
large fleet of vehicles.

Destination sheet
Delivery note
A delivery note is a document
that lists all the goods included
in a delivery, and is often
referred to as a dispatch note,
or goods receipt. The note is
included in the shipment and
lists the quantity of products
included in the delivery. It does
not list any values like price of
goods.
 Since trade is the exchange of goods and
services between buyer and seller at an agreed
money value, it means that commodities
bought must be paid for.

Instruments of
payment

The method of payment for goods and services

is dependent on many factors, including:
The sum to
The safety The The The date
be paid (the
and security distance urgency due
amount)
 Cheque
Money order
Bank draft
Debit card
Examples of Credit card

instrument of Telegraphic money transfer

Letter of credit
payment Promissory note
A cheque is an instrument of payment where an
individual or company directs his/her bank to pay
someone a specific amount of money, from his/her
bank account. Cheques are generally valid for six
months.

cheque
Important features of a cheque
It must be drawn upon a specified bank (drawee)
It must be signed by the person issuing the cheque
(drawer)
It must have the name of the recipient of the cheque
(payee)
It must state the amount of money in words and figures
It must be dated
Open An open cheque can be taken

cheque
to the bank to be:
• Converted into cash
immediately An open cheque is ‘uncrossed’
• Paid into a bank account meaning it does not have 2
parallel lines drawn across it.
• Passed to someone else by
endorsing it (signing the
back of the cheque)

Open cheques are not

considered to be very safe
Banks encourage the use of
because if the cheque is lost or
crossed cheques rather than
stolen, someone else besides
open cheques
the payee or endorsee may be
able to cash it.
 A crossed cheque has 2 parallel lines on the face
Crossed cheque of the cheque with or without words written in
it.
In general crossing words such as ‘A/C Payee’,
or ‘& Company’ or ‘Not Negotiable’ are written
between the parallel lines.
In special crossing, a particular bank’s name is
written.
In addition ‘A/c Payee’ and ‘Not Negotiable’ may
also be included in specially crossed cheques.
A crossed cheque cannot be cashed at the bank.
It can only be paid into the payee’s account.
Crossed cheques are considered safer than
open cheques
 If the amount stated If the drawer has
on the cheque is more If the drawer has closed his bank
than the amount of cancelled or stopped account before the
money in the drawer’s payment of the cheque cheque has been
bank account. presented for payment

If the amount was not

If the signature on the If the cheque is stale
written in words and
cheque does not match (presented for
numbers or if there is a
the signature on file payment after six
disparity in the words
kept by the bank months has passed)
and numbers written

Reasons for ‘bounced’ cheques

A money order also referred to as a bank money order
is a method of payment.

It is sold by banks to those who wish to use this

method to make overseas payments for foods or
services.
Money
order
The money order indicates the amount of money to be
paid to the person named in the order.

Persons who make donations to organizations and pay

fees to educational institutions overseas often use
money orders.
The money order is:
• an acceptable instrument for making
payments
• Issued by the bank after the buyer has
paid the equivalent of the amount
required as well as the fee charged by the
bank
• Normally easily encashed at a bank
• Negotiable and can be endorsed (signed)
by the payee, and transferred to someone
else
• Available to persons with or without bank
accounts
In some countries money orders can be
obtained through the post office
 A bank draft is another method of
Bank draft payment which can be used when
payments for goods or services are
to be made in a foreign currency.
Persons or companies that trade
with foreign countries can pay their
debts by using the bank draft.
The person or business requiring
the draft must pay the equivalent
of the foreign currency needed.
The bank charges a fee for the
service
A bank draft
o Is a business or personal instrument of payment
o Is guaranteed by the bank on which it is drawn because the banker
would have checked the customer’s account to verify that the
amount required is available.
o Alternatively, the purchaser may have paid over the equivalent
amount to the bank if he/she did not have an account with the bank
from which the bank draft was purchased.
o Must have the official signature of the person authorized to issue
such drafts
o Attracts a charge or fee for the services rendered, even in the case
where the purchaser may have provided foreign currency in cash.
Telegraphic money order is a quick way of Telegraphic money
making payments or transferring sums of
money to persons in local or overseas locations. transfer
Telegraphic money transfers are part of the
electronic banking system.
The sender of the funds needs to provide the
following information to his/her bank so that
the transfer can be facilitated:
❖Name and address of the recipient of the
funds
❖The amount to be paid
❖The instructions to the recipient
This modern method of payment enhances international trade as it
reduces the time taken to complete business transactions.

Other names for telegraphic money order are electronic money

transfer (EMT), (EFT) or electronic banking (EB).

A number of businesses require their staff to open bank accounts so

that the payment of salaries can be done electronically. This method
of paying salaries is referred to as direct payroll deposit and is
facilitated through multi-link systems established by banks.
It saves time as cheques do not have to be written

It reduces the chance of a cheque being lost or

misdirected
Advantages
OF DIRECT
PAYROLL
It is an easy way of making payments to employees DEPOSIT

Employees do not have to waste time trying to gain

cheque verification before encashing their pay
cheques
 Debit cards or linx cards allow individuals to pay for
goods or services without having to physically carry
around notes and coins.
A debit card is a small plastic card given to persons
who own commercial bank accounts.
Some other financial institutions also offer debit cards
Debit card to their customers.
Holders of debit cards can make payments using the
funds in their account.
In order to use debit cards, the stores must be
equipped with a linx machine to facilitate payment by
this means.
Individuals can withdraw cash from automated Teller
Machines using their debit cards.
Credit cards are similar to debit cards in that
they look similar and they also allow individuals
to make payments without having to carry
around notes and coins.
Credit cards are issued by financial institutions
such as commercial banks and require a PIN or
signing a voucher as a security measure.
The key difference between a debit card and a
credit card is that the credit card allows for
purchases to be made on credit (borrowed
funds) whereas the debit card only allows
purchases to be made using funds the individual
actually has at that time.
Credit card
Promissory
The promissory note is ‘an
unconditional promise in writing
made by one person to another,
note This is an old instrument
used in transacting
signed by the maker engaging to
pay on demand, or at a fixed or
business over many determinable future time, a sum
years. certain in money to, or to the
order of a specified person or to a
bearer’.

It is a promise made in
Promissory notes were
writing that the borrower
common in early times
of money will pay the
when ordinary persons
lender the amount
did not have access to
borrowed at a particular
bank loans.
date in time.
Letter of credit https://www.youtube.com/watch?v=9bZwWuiw8hQ

A letter of credit is used in international trade transactions. It allows an importer

or buyer to offer secure terms of payment, which involves one or more banks, to
an exporter or seller

The technical term for a letter of credit is documentary credit.

The letter of credit deals with documents not goods. The aim of this transaction is
to shift the risk from the actual buyer or importer to a bank.

Thus, the letter of credit is a payment undertaking given by a bank to the seller
and is issued on behalf of the buyer or the applicant. The seller is the beneficiary.
The bank that issues the letter of credit is
the issuing bank which is generally
located in the country of the buyer.
The bank that advises the letter of credit
to the seller is called the advising bank
which is generally in the country of the
seller.
When the seller presents the required
documents within the specified time
frame to the advising bank and the bank
examines the documents (not the goods)
and finds them in order then payment is
made to the seller.
The entire process under LC consists of four primary steps:
Letter of credit process
Step 1 - Issuance of LC
After the parties to the trade agree on the contract and the use of LC,
the importer applies to the issuing bank to issue an LC in favor of the
exporter. The LC is sent by the issuing bank to the advising bank. The
latter is generally based in the exporter’s country and may even be the
exporter’s bank. The advising bank (confirming bank) verifies the
authenticity of the LC and forwards it to the exporter.
Step 2 - Shipping of goods
After receipt of the LC, the exporter is expected to verify the same to
their satisfaction and initiate the goods shipping process.
Step 3 - Providing Documents to the confirming bank
After the goods are shipped, the exporter (either on their own or
through the freight forwarder) presents the documents to the
advising/confirming bank.
Step 4 - Settlement of payment from importer and possession of goods
The bank, in turn, sends them to the issuing bank and the amount is paid,
accepted, or negotiated, as the case may be. The issuing bank verifies
the documents and obtains payment from the importer. It sends the
documents to the importer, who uses them to get possession of the
shipped goods.
The process benefits both the seller The documents the seller has to
and the buyer. present
• The seller is assured that if the documents • Commercial invoice
are presented on time and in the manner
• Transport documents such as a bill of
requested on the letter of credit the payment
lading or airway bill
will be made.
• Inspection certificate
• The buyer is also assured that the bank will
thoroughly examine the documents • Certificate of origin
presented by the seller and ensure that they • Insurance document
meet the terms and conditions expressed in
the letter of credit.
 Irrevocable – a letter of Revocable – in a revocable
credit is irrevocable when it letter of credit, changes can
cannot be changed unless be made to the letter of
both the buyer and seller credit without the consent

Types of agree to the change. of the beneficiary

letters Sight – a sight letter of

of credit
Time or date – a time or
credit means that payment
date letter of credit will
may be made immediately
state when payment will be
to the beneficiary or seller
made in the future when
upon the presentation of
the required documents are
the correct documents in
presented
the correct time frame.
 Discrepancy with the Therefore the earlier in the
letter of credit – if there is transaction process the
a simple error such as a letter of credit is examined
comma on a letter of the more time there will be
credit, this can render it to identify a problem and
invalid. make corrections.
 Question
Time
You purchased an item from a variety store and were not given a

receipt. The owner explained that he never usually gives a receipt.

Explain to him the importance of not only a receipt but two other

business documents to the operation of his business.