ESSENTIAL BUSINESS DOCUMENTS (LETTER OF INQUIRY , INVOICE , CREDIT , RECEIPT QUOTATION)

 

COMMERCE

FIRST TERM

SENIOR SECONDARY SCHOOL 3

SS 3

WEEK 3.

TOPIC:- BUSINESS DOCUMENTS

CONTENT:

1. Essential Business Documents (Letter of inquiry, invoice, credit , receipt, quotation etc)
2. Trade terms and abbreviation e.g. COD cash on delivery , CIF Cost Insurance Freight etc
3. Terms of trade e.g. cash, credit payment in arrears etc
4. Means of payment e.g. legal tender, standing order etc

SUB-TOPIC 1: Essential Business Documents (Letter of inquiry, invoice, credit, receipt quotation

LETTER OF INQUIRY:

The inquiry is usually the first stage in a transaction. It is sent by potential buyer to a seller, or many sellers, requesting information, prices and delivery terms related goods or services required. The enquiry may a letter or it may be standard printed form on which the information required can be filled. An alternative way to receive quotations is to invite tenders, i.e. offers of supply from any number of firms interested in supplying whatever is required. A tender is a competitive quotation one submitted in competition with other potential supplies. Tender may be invited by advertising an interest in receiving open quotations, or bids, in competition with others.

INVOICE:

An invoice is a commercial document issued by a supplier to its customer. It usually contains details of the goods or services sold, the quantities, prices and total amount due from the customer. The invoice may also include details such as payment terms, discounts offered if any, and other relevant information related to the transaction.

An invoice is a form in which the seller lists the items sold to a buyer. The following particulars are usually contained in an invoice:

1. Name and address of the supplier or seller
2. Date and reference number of the invoice
3. The goods sold and their prices
4. Discount granted and other trade terms
5. Total amount payable on the invoice including taxes if any
6. Signature of the seller

An ordinary invoice is used along side with the goods. An invoice is sent without goods accompanying it (in advance of the goods) is called a pro forma invoice. It is sent under the following circumstances:

1. When the sellers insist that buyer pays before the goods are delivered to them
2. When the buyers need the particular of the goods he wants to buy in order to clear some custom formalities
3. When the buyer does not place an order for the goods but the seller wishes to explore his readiness to buy.

RECEIPT:

A receipt is a written acknowledgement of money received. When the buyer receives goods and is satisfied with the details as contained in the invoice, he remits the money due on the invoice. On receiving the money, the seller sends a receipt tom the buyer as evidence that the goods have been paid for. A receipt usually contains the following important particulars

1. Name of the issuer (seller)
2. Date and reference number
3. Name of the payer(buyer)
4. Reason for the payment
5. Amount of the payment in word and figures
6. Signature of the receiver of the payment.

EVALUATION:

1. List five particulars that are contain in the receipt
2. What do you understand by the word receipt?
3. What is an invoice, and what are the key elements that it usually contains?
4. What is the purpose of sending a pro forma invoice, and when might this be used?
5. How does the buyer typically pay for goods received, and what role does the receipt play in this process?

QUOTATION:

Quotation is sent to the potential buyer by the firms interested in supplying the goods. Where it is not possible to quote a precise price, the seller will quote an estimate or expected cost. Quotation will also give details of discounts offered:

1. Trade discount : given to people in the same trade as the seller to enable them to make a profit on resale
2. Quantity discount: this is given to encourage the buyer to place a large order, a lower price will be offered for a larger order.
3. Cash discount : it is given to encourage prompt payment. It is usually offered as a percentage of the amount due, if payment is made within a fixed period of time.
4. Other details that may be included in the quotation are: delivery and payment terms, warranty information, packaging requirements and any other relevant information.

ADVICE NOTE:

A document sent by the supplier to the buyer informing him of the date on which the listed goods were dispatched and the means of transportation. It has the following uses.

1. It is used to inform the buyer that his goods are on the way.
2. It is used to show the mode of transport used.
3. It is used to inform the consignee of the likely time the goods would arrive etc.
4. It is used to show that the buyer and seller are in communication.
5. It is used to show that the goods have left the possession of the supplier and are now with transport services for onward dispatch to the destination.
6. It gives details of how to claim compensation if there is any delay or damage during transit.
7. Other information such as packing list and bill of lading may also be included in the advice note.

CONSIGNMENT NOTE:

A document given 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. Its uses include;

1. It is used when the wholesaler engages an independent transporter to convey the goods to the retailer
2. Shows the details of the goods
3. It is used as an evidence of delivery when duly signed by the consignee.

CREDIT NOTE: this is the process where a customer is overcharged for the goods he/she bought from the buyer. If the invoice has charged the customer N200 instead of N190. This mean the customer has been overcharged by N10. In this case, the seller will sell a credit note of N10 to the buyer (customer)

Other essential business documents include;

1. Trade journals
2. Catalogue and price list
3. Delivery note
4. Statement of account
5. Debit note

EVALUATION

1. What do you understand by letter of inquiry?
2. Explain any 5 business documents that you know
3. What do you understand by credit note?

SUB-TOPIC 2:   

TRADE TERMS AND ABBREVIATION

These are various terms and abbreviations commonly used in Commerce. They include:

1. Discount: discount can be defined as the reduction in the price of goods to encourage bulk purchases and prompt payment. There are various types of discount a. Cash discount

• Trade discount
• Seasonal discount
• Quantity discount

1. Carriage paid: A price quotation for goods in which the seller bears all delivery and transportation charges.
2. Ex-warehouse: A quotation of price of a commodity which excludes all delivery charges.
3. Carriage forward: It signifies that the buyer is responsible for the payment of carriage when he received the goods dispatched by the seller.
4. Ex-works: This means that the buyer is responsible for all delivery charges except loading unto the road or rail vehicle for which the seller is responsible.
5. C/F (cost and freight): this includes freight charges, which may even include overseas delivery
6. CIF (cost insurance and freight) : it includes cost of insurance while goods are in transit
7. FAS (free alongside ship) : price include delivery to a ship, but does include loading charges
8. FOB (free on board) : cost include freight charges, including loading on to a ship

10.FOR (free on rail): as in the case of FOB but it includes loading onto a rail wagon.

11.FOQ (Free on Quay): Price includes only delivery to the quay for shipment.

12.Franco: This means that the price quoted includes the cost of insurance, freight and all delivery charges to the importer’s warehouse.

Some of the most other commonly used abbreviations in business include:

PO (Purchase Order): This refers to a document issued by a buyer that indicates the items and quantity being ordered from a seller.

RRN (Retail Reference Number): A unique number assigned to each purchase order or invoice when an item is sold through a retail store.

VAT (Value Added Tax): A form of sales tax assessed on the value added to a product or service at each stage of production or distribution.

EDI (Electronic Data Interchange): The exchange of business documents in machine-readable formats using computer networks, such as the internet.

T&Cs (Terms and Conditions): The terms and conditions of a contract, including any associated legal requirements such as licensing or compliance requirements.

MO (Manual Order): A document that is created by hand to record an order for goods or services.

POA (Power of Attorney): A legal form that grants another person the right and power to act on behalf of the person executing it.

POC (Point-of-Contact): The person or entity that is responsible for coordinating communication or activities on a particular project, program, or initiative. In many cases, this individual acts as the main point of contact between different internal and external stakeholders to ensure that all communication flows through one channel.

B2B (Business-to-Business): The exchange of goods or services between companies rather than between businesses and individuals.

C2B (Consumer-to-Business): This refers to transactions where a customer purchases products or services from a business for the purpose of reselling them to other customers.

SCM (Supply Chain Management): A system of planning,

SOME SPECIAL ABBREVIATION

1.

A/C

Account current

2. ADV

advertisement

3. Amt

amount

4. a/o

account of

5. A/P

account payable

6. Approx

approximate

7.

A/R

Account receivable

8.

A/S

account sale

9.

Bal

bring (brought) down

10.b/d

bank draft

11.be

bill of exchange

12.b/f

brought forward

13.b/p

bill payable

14.b/r

bill receivable

15.E.T.D

Estimated time of departure

16.Div

dividend

17.d/y

delivery

18.E.T.A

Estimated time of arrival

19.E.P.T

20.E.E

21.D.N

22.E &OE

EVALUATION:

Explain the following :

1. Estimated time tax
2. Errors Excepted
3. dispatched note
4. Error and omission expected.

Estimated time of tax is a term used in business to refer to an estimate or prediction of when a particular event, such as the arrival of goods or payment for services, will occur. Errors excepted refers to an acknowledgment that there may be mistakes or omissions in a given document or transaction, but these are usually expected and do not necessarily imply any wrongdoing or negligence. Dispatched note is a document that is issued to inform recipients of the delivery or shipment of goods or services. Finally, error and omission expected indicates that mistakes are understood to be an inevitable part of doing business, and do not necessarily indicate any issues with the quality or integrity of a given product or service.

Briefly explain the following:

1. C/F
2. CIF
3. F.A.S
4. F.O.B
5. F.O.R

C/F, CIF and F.A.S all refer to trade terms that are used to specify the point at which responsibility for goods is transferred between parties, typically during the sale of goods or services. C/F stands for cost and freight, and indicates that the buyer assumes responsibility for shipping costs up until the point of arrival. CIF stands for cost, insurance, and freight, and indicates that the buyer is responsible for paying not only shipping costs but also insurance expenses. F.A.S, on the other hand, stands for free alongside ship, and indicates that the delivery of goods occurs while they are still on board a vessel or other type of transport. Finally, F.O.B stands for free on board, and indicates that the buyer assumes responsibility only once the goods have been unloaded from their transport. F.O.R, or free on rail, is another variation of this trade term that applies to situations where goods are delivered by train rather than by ship or other means.

Evaluation :

1. What is the role of supply chain management in modern business operations?

2. How do different enterprises and industries approach supply chain management differently?

3. What are some common challenges or issues that companies must address when managing their supply chains?

4. How can organizations effectively measure and optimize their supply chain performance?

5. What are some strategies or best practices that companies can use to improve their supply chain efficiency and effectiveness?

Explain the following terms

1. a. franco
2. . FOQ
3. E & OE
4. carriage forward.

SUB – TOPIC 3:

Terms of sale

Cash sale: It involves transfer of property or goods from the seller to the buyer on cash basis. Cash payment will be made immediately for goods sold to customers.

Types of cash sale

1. Prompt cash: payment of cash for the goods within a few days
2. Spot cash: The buyer pays cash immediately for goods bought before taking them away.
3. Cash with Order (CWO): The buyer encloses the money when the order is made.
4. Cash on Delivery (COD): The buyer pays for the goods as they are delivered to him. Payment is made through the post master.
5. Credit sale: Ownership and possession of the goods is transferred to the buyer without immediate payment.

Evaluation :

1. What is a cash sale, and what are the different types of cash sales?

2. How does credit sale differ from other methods of payment for goods or services, and what are some common characteristics of credit sales?

3. What is ownership transfer, and how does it relate to terms of sale?

4. What is the difference between prompt cash, spot cash, and cash with order payments, and what are some factors to consider when deciding on a payment method?

5. What is carriage forward in terms of Terms of Sale, and why is it important to understand this concept when making sales or purchasing goods?

SUB-TOPIC 4:

MEANS OF PAYMENT

Payment is the settling of financial transactions or the settlement of outstanding debt between a creditor and a buyer.

Factors affecting the method of payment

1. Total amount of money
2. The cost of the means of payment
3. The urgency of payment
4. The type of account kept by the debtor
5. The safety of money
6. The date of payment
7. Distance between the payer and receiver.

EVALUATION :

1. What is the definition of payment, and what are some common methods used for making payments?

2. How do different factors, such as distance and cost, affect the selection of a payment method?

3. What are the advantages and disadvantages of using cash versus credit cards or other means of payment?

4. How does the creditworthiness of the debtor affect payment methods, and what are some strategies for managing risk when making payments?

5. What is the importance of security and safety in terms of paying debts or settling financial transactions, and how can businesses best protect their funds during these processes?

1. Supply chain management is the coordination and integration of all activities involved in the movement and storage of raw materials, work-in-process inventory, finished goods, and related information from point of origin to point of consumption. It involves managing the flow of materials, money, and information between different stages of production and distribution in order to meet customer demand for goods and services.

2. Common challenges in supply chain management include managing inventory levels, ensuring optimal product flows and logistics, coordinating complex transportation networks, tracking and forecasting market demand, maintaining supplier relationships, adapting to changing regulatory requirements, and minimizing costs while maximizing efficiency and effectiveness.

3. Strategies for improving supply chain performance can include increasing transparency and collaboration, optimizing product flows and logistics, investing in technology and automation, improving forecasting techniques, streamlining production processes, minimizing waste and resource usage, developing more flexible supply chains that can adapt to changing conditions, and partnering with other businesses to share resources or collaborate on projects.

4. Key success factors for effective supply chain management include strong leadership and planning, comprehensive information systems and data analysis, effective collaboration and communication, efficient use of resources, flexible business strategies, proactive risk management, continuous innovation and improvement efforts, and a focus on customer needs.

VARIOUS MEANS OF PAYMENT

1. Legal tender: A form of payment in which the creditor is compelled by the law of a state to accept in settlement of debt. Legal tender can be inform of bank notes and coins.

1. Payment through bank: This can be inform of cheques, standing order, bank draft, credit transfer (bank giro), travelers cheque, certified cheque etc.

1. Payment through the post office: This can be inform of postage stamps, postal orders, money orders, telegraphic money order, postal giro etc.

Business means of payment:

1. Bill of exchange
2. I Owe You (IOU)
3. Promissory note.

EVALUATION

1. Classify means of payment under the following headings: a. Legal tender b. banking system c. post office
2. Explain any five means of the payment identified in 1a above.

1. Legal tender: Legal tender refers to a form of payment that is legally required to be accepted by creditors in settlement of debt. Some common types of legal tender include bank notes and coins, cheques, credit transfers, and postal orders.

1. 2. Banking system: The banking system refers to the network of financial institutions and service

WEEKEND ASSIGNMENT

Read Essential commerce for senior secondary schools by A.O Longe pages 311 -314

PRE-READING ASSIGNMENT: Read about the consumer protection.

1. Consumer protection refers to laws and policies designed to safeguard the rights and interests of consumers in a variety of contexts, including the marketplace, financial services, healthcare, digital products and services, and beyond.

2. Key elements of consumer protection include ensuring fair market competition, promoting transparency in product information and pricing, protecting against deceptive or unfair business practices, and ensuring access to safe and high-quality products and services.

3. Consumer protection policies may be implemented at the national, regional, or local level by government agencies such as consumer protection bureaus or regulatory boards, as well as through private advocacy and consumer rights organizations. One of the main goals of consumer protection is to ensure that consumers are treated fairly by businesses and service providers and have access to information necessary to make informed decisions.

4. Some of the key strategies for promoting consumer protection include creating and enforcing regulatory standards, providing targeted education and awareness programs, enacting consumer rights legislation, establishing complaint systems or ombudsmen to handle customer grievances, requiring businesses to provide a minimum level of service, and promoting consumer advocacy and empowerment.

5. There are also various challenges and areas for improvement when it comes to consumer protection, including the need for greater transparency in product information; addressing environmental concerns related to consumer goods; improving access to quality healthcare and insurance; ensuring that digital products and services meet basic security, privacy, and safety standards; addressing the concerns of vulnerable or at-risk consumers, such as seniors and immigrants; and strengthening consumer protections in international trade agreements. Overall, the goal of consumer protection is to promote a fair, safe, and transparent marketplace that benefits consumers, businesses, and society as a whole.

Weekend activity: Why must consumers be protected?

REFERENCE BOOK: Essential commerce for senior secondary schools by A.O Longe