Documents Used in Home Trade 1

A business document is a written record which gives evidence to a stage in the transfer of goods or provision of services from one party or it is written record which gives evidence that trader or a business transaction has taken

place.

business transaction is a deal between two or more people involving exchange of goods and services in terms of money.

Business transaction may take place on cash basis; in which case goods are paid for before or on delivery or a short while after delivery
Business transaction may also take place on credit basis;

which means payment is made after a specified period from the date of delivery of the goods or the provision of the services

There are various business documents that are used in various stages of business transactions as discussed below;

a) Documents used at the inquiry stage

This is the first stage in transaction. An inquiry is a request by a prospective
buyer for information on available goods and services.

It is aimed at establishing the following;


  • Whether the goods or services required are available for sale
  • The quality or nature of the products available
  • The prices at which the goods or services are being sold
  • The terms of sale in respect to payment and delivery of goods or services Some of the documents used at this stage include;

    i) Letter of inquiry;

    This is a letter written by a potential buyer to the seller to find out the goods and services offered by the seller.

    A letter of inquiry can be general or specific. A specific letter of inquiry seeks for information about a particular product.

    Reply to an inquiry The seller may reply to the letter of inquiry by sending any of the following documents;

    Price list A catalogue -Quotation -A tender

    i) A price list

    This is a list of items sold by the trader together with their prices. The information contained in a price list is usually brief and not illustrated and may include;

  • Name and address of the seller -List of the goods and services
  • The recommended unit prices of the products -Any discounts offered Price list show the prices of the commodities at that time.

    ii) A catalogue; A catalogue is a basket which briefly describes the goods a seller stocks.

    It is normally sent by the seller to the buyer when the buyer sends a general letter of inquiry.

    It usually carries illustrations on the goods stocked, and could be in the form of attractive and colorful pictures

    The content of a catalogue includes the following;

  • Name and address of the seller
  • Details of the products to be sold; inform of pictures and illustrations
  • The prices of the products
  • After-sales services offered by the seller
  • Packaging and posting expenses to be incurred
  • Delivery services to be used
  • Terms of sale

    Catalogues carry more information than the price list and they are more expensive to printiii) Quotation; This is a document sent by a seller to a buyer in response to a specific letter of inquiry.

    It specifies the conditions and terms under which the seller is willing to supply the specified goods and services to the buyer.

    The content of a quotation includes the following;

  • Name and address of seller -Name and address of the buyer
  • Description of goods to be supplied -Prices of the commodities
  • Terms of sale i.e. discounts, time of supply, delivery
  • Total of the goods to be supplied Quotations are normally in form of letters, but many large-scale businesses have pre-printed quotations forms which they readily send to the potential customers.

    iv) A Tender

    This is a document of offer to sell sent by a seller to a buyer in response to an advertised request Tenders contain the following;-Date when the tender advertisement was made -Mode of payment
    -Date of making document -Discounts given

    -Name and address of prospective seller called the tenderer

    -The prices at which the goods can be provided
    -Period of delivery -Mode of delivery

    -Tenders are delivered in sealed envelopes which are opened by the buyer on a specified date

    The winning tender is usually awarded on the of the lowest quoted price although the buyer is not obliged to accept this especially if quality is likely to be low

    Tenders are not binding unless accepted by the buyer.

    b) Documents used at the order stage After receiving replies to inquiry in form of price list, catalogue or Quotation,
    a prospective buyer will study the terms and conditions stated in them, and then may decide to buy products or not.

    i) An Order

    If a prospective buyer decides to purchase an item(s), he or she then places an order
    An order is a document sent by a potential buyer to a seller requesting to be

    provided with specified products under specified terms and conditions

    -An order issued for goods is called a local purchase order (LPO)
    An order issued for services is called a local service order (LSO)

    Ways of making an order

    i) Filling an order form. This is a pre-printed document that is used for making orders

    ii) Writing an order letter

    iii) Sending an e-mail, faxing or sending a short text message

    iv) Giving a verbal order. Verbal orders have the disadvantage in that they can be misunderstood and there would be no record of items ordered

    -Where written orders are made, the potential buyer keeps a copy of the order for use in verifying the goods ordered when they are delivered.

    A written order may contain the following;

  • Name and address of the buyer
  • Name and address of the seller
  • The number of the order
  • Quantities ordered and total amount to be paid
  • Description of the goods ordered
  • Price per item
  • Special instructions on such matters as packaging and delivery

    ii) Acknowledgement note

  • On receiving the order, the seller sends the buyer an acknowledgement note

    An acknowledgement note is a document sent by the seller to the prospectiv buyer to inform him/her that the order has been received and it is being actedupon.

    After sending the acknowledgement note, the seller has to decide whether to extend credit to the buyer or not. At this stage, the seller has the following options;

    i) If the seller is convinced that the buyer is credit worthy, arrangements are made to deliver the ordered goods or services to the buyer.

    ii) If the seller is not sure of credit worthiness of the buyer, a credit status inquiry can be issued to the buyer’s bankers or to other suppliers who Can be used to serve as a quotation

    Circumstances under which a pro-forma invoice may be used

  • If the seller does not want to give credit
  • If the seller wants to sell goods through an agent
  • If the seller wants to get clearance for imported goods
  • If the seller wants it to function as a quotation
  • If the seller wants to inform the buyer what he/she pay if the order is approved e.t.c

    Documents used at the Delivery stage After the seller has accepted the order sent an acknowledgement note and necessary the pro-forma invoice, the seller then prepares the goods for
    delivery to the buyer. This can be done in the following ways;

  • The seller can ask the buyer to collect the goods
  • The seller can deliver the goods to the buyer using his/her own means of
    transport
  • The goods can be delivered to the buyer through public transport

    The services(s) can be rendered to the buyer at the sellers or the buyer’s premises or at any convenient place.

    The main documents that are used at this stage are;

    i) Packing note; Before delivery goods are packed for dispatch.

    This is a document prepared by the seller showing the goods contained/packed in every container, box or carton being delivered to the buyer
    -A copy of the packing note is packed with the goods to make/help the buyer have a spot check.

    The contents of a packing note include;

    -Description of goods packed

    -Quantities of goods packed

    -The means of delivery

    NOTE: A packing not does not contain prices of goods.

    This ensures that those people involved in checking and transporting goods do not know the value of goods. This is done as a precaution against theft.

    ii) Advice note This is a document sent by the seller to the buyer to inform the buyer that the ordered goods have been dispatched. It is usually sent through the fastest means possible.

    It contains the following;

    -The means of delivery -A description of the goods
    -The quantity dispatched -Date
    -Name and address of buyer and seller

    Documents Used in Home Trade Page 1 | Documents Used in Home Trade Page 2 | Documents Used in Home Trade Page 3 | Documents Used in Home Trade Page 4 | Documents Used in Home Trade Page 5 | Documents Used in Home Trade Page 6

  • Click here to post comments

    Join in and write your own page! It's easy to do. How? Simply click here to return to Business Studies FAQ.

    Scholarship 2020/21

    Undergraduate Scholarships 2020/2021
    Masters Scholarships,
    PhD Scholarships,
    International Scholarships.