Every business transaction for goods
or services involves at least two organizations, one doing business purchasing
and other doing the selling. Financial documents are generated for every
transaction as proof of the transaction. Some documents are essential because
they are used to record information about financial transactions in “books of
original entry”, otherwise known as “journals”. Other documents are optional,
that is they are not required in every business transaction. Journals do not
record the information on optional documents.
Guidelines for completing financial
documents
Many documents and books of account
are now processed electronically. However, the following guidelines apply to
completing financial documents and books of account in a manual system:
- Handwriting must be
legible
- Figures must be
legible and kept in alignment
- Errors should be
ruled out with a pen and the correct figure should be written above
- Correction should be
initiated
- You should not use
correction fluid or erasers to correct errors
Requirements for financial documents
Documents raised in an organization
for financial purposes have specific requirements for accounting, business,
records, taxation and legal purposes. Documents are:
- “Accountable forms”
and must not be destroyed; an “accountable forms” register is kept for
audit purposes; unused forms must be stored in a secure place
- Required to display
the name (and other details) of the organization generating the document
- Numbered
consecutively; an alphabetical prefix to the number indicates a series
- Required to have an
original and a duplicate; some organizations may produce even more copies
- Required to show the
date of he transaction
- Required to record
the numbers of the documents to which they refer; this provides an “audit
trail”
Credit transactions
Businesses mostly conduct
transactions on a credit basis. This means that goods or services are not paid
for at the time of the transaction. A supplier extends credit to a purchaser.
The purchaser must complete an “Application for Credit”. This document outlines
the terms of trade established by the supplies and agreed to by the purchaser.
Financial documents are usually pre-printed. They are designed to conform to
the accounting practices and computer systems of the company.
Terms of Trade – Credit limit
When negotiating terms of trade, the
supplier will set a credit limit for the purchaser. The decision will be based
on the purchaser’s financial situation, credit rating, paid up capital, etc.
Nett 30 days
Most of organizations stipulate Nett
30 days for payment. This means that purchases for a month (say 1-30 June) will
appear on the statement prepared by the supplier at the end of June. When the
purchaser receives this statement from the supplier early in July, the
purchaser has until 31 July to pay the account. If the account is not paid by
31 July, the amount will be “aged” on the statement into the “outstanding 30
days” box.
No comments:
Post a Comment