You will recognise many of the following when studying sales transactions.
A purchase order is a written request by a business for the supply of a specified quantity of goods or a service.
Large businesses may have a specialist purchasing department, with buyers whose job is to process purchase requisitions. They may ask several potential suppliers to submit a price quotation, or they may select a supplier and negotiate a price.
Having agreed the purchase terms with a supplier, the buyer prepares a formal purchase order. One copy goes to the supplier, and is the formal order. At least one other copy is retained, as documentary evidence for use when checking later on.
An example of a purchase order was shown in an earlier chapter.
When services are purchased, the purchase order can take the form of a written contract, specifying the nature of the service and the agreed price.
When a supplier delivers goods, a delivery note (also referred to as an advice note), normally in duplicate, is prepared and accompanies the goods supplied. It is a record of what the supplier has delivered to the purchaser. One copy of the delivery note is retained by the supplier and two copies accompany the goods delivered.
The physical goods received are checked against the delivery note by the person receiving the goods, such as a member of the stores or warehouse team. Any discrepancies between them should be identified and reported. For example, the delivery note may state say that 10 boxes have been delivered, but in fact only 8 boxes have been delivered.
The condition of the goods should also be checked. If some or all of the goods appear to be in a poor or damaged condition, the person accepting the delivery can do one of three things:
If goods have been accepted in unsatisfactory condition, or if some goods have been rejected, this fact should be recorded on both copi copies of the delivery note and signed. One copy is returned to the supplier and the other is retained by the purchaser. This means that both the purchaser and supplier have a signed copy of the delivery note which includes comments regarding the quantity and condition of the good delivered.
FA1: RECORDING FINANCIAL TRANSACTIONS
When services are provided, a documentary record is often kept to confirm that the work has been done. An example is work carried out by an outside contractor on the customer's premises, such as a plumber or electrician doing repair work.
It is quite common for such services to be charged for according to the time spent by the contractor doing the work. The plumber or electrician will state the time taken to do the repair work, along with any other charges for components.
When services are provided on a time-charged basis, there should be:
An example of a timesheet is shown below. This is a timesheet for work done by an engineer who works for an outside contractor. It is prepared by the engineer's employer, Telesouth Installation Engineers, and checked and confirmed by R Ruan, an employee of the customer, J Forrester Wholesale Supplies.
| Day | Hours worked | Weekday hours | Weekend hours |
|---|---|---|---|
| 0 | 0 | ||
| Saturday | 0 | 0 | |
| Sunday | 0 | 0 | |
| Monday | 9am-5pm | 8 | |
| Tuesday | 9am-5pm | 8 | |
| Wednesday | 9am-5pm | 8 | |
| Thursday | 9am-5pm | 8 | |
| Friday | 9am-5pm | 8 | |
| Total hours | 40 | 0 |
The supplier usually submits an invoice when the goods or services are delivered, or soon after. The sales invoice issued by the supplier is a purchase invoice to the customer. Whereas a sales invoice represents income to the supplier, purchase invoices represent expenditure to the purchaser.
Invoices are often addressed to the accounts department, and it is at this stage that the accounts staff become involved in checking and recording the items of expenditure.