BUSINESS TRANSACTIONS

Chapter 2
Internal Control Features
• We have seen in the introduction that it’s
very important for the owner to keep track of
the operation’s assets.
• Is it possible for the owner to look after
his/her assets on his/her own?
• Thus, the owner need to have basic internal
control, especially on the financial
information.
 Internal Control Features
1. Clear Identification of Roles & Responsibilities
2. Separation of Potentially Conflicting Duties
3. Supervision
4. Documentation
5. Authorization
6. Rotation of duties
7. Independent checks
8. Physical security
Clear identification of roles &
responsibility
• Responsibility of each staff should be clearly
identify.
• This should be backed up with detailed job
descriptions & duty task statements – usually
in Appointment Letter.
Separation of potentially conflicting
duties
• General rule – record keeping & physical
handling of assets should not be done by the
same person.
• E.g. the person authorizing orders &
payments should not be handling receiving
of stock or storage.
Supervision
• Every staff should be under supervision of a
supervisor.
• Supervisor will oversee and appraise staff’s
performance.
Documentation
• There should be detailed documentation to
back up all business transactions.
• It will provide:
– Provides raw data for an accurate financial
recording system
– Means of tracing back & reconstructing info if
necessary
Authorization
• Especially important for staff that perform
accounting tasks with business documents
• E.g. authorization for payment
Rotation of duties
• Company staffs should be rotated in terms of
duties performed/assigned.
• It will reduce boredom and at the same time
deter fraud as each subsequent staff is
checking previous staff’s work.
Independent checks
• Regular or random checks should be done
• E.g. stock takes
Physical security
• Have a security guard on premise
Flow of
Documents

THE FLOW OF DOCUMENTS

Action by seller Sequence Action by buyer or
or supplier purchaser
Sends QUOTATION Receives

Receives PURCHASE ORDER Sends

Sends ADVICE NOTE Receives

Sends DELIVERY NOTE Receives and raises

(with goods) goods received
note
Sends INVOICE Receives

Receives and RETURNS NOTE* Sends

raises goods (if goods are faulty, etc.)
received note
Sends after CREDIT NOTE* Receives
approval to give
credit
Sends STATEMENT OF ACCOUNT Receives

Receives REMITTANCE ADVICE Sends

(payment)
QUOTATION – SELLER/SUPPLIER
• An offer to supply goods or services
• Will include:
– What is to be supplied
– When
– Where
– The price
– Terms (condition of sale)
QUOTATION

1524 132nd St
College Point, NY 11356
Telephone: 718 939 6400
Fax: 718 939 6401
QUOTATION

1667 133nd St Date: 2 May 2013

College Point, NY 11356 Our Ref.: 2013

Thank you for your enquiry of 22 April 2013. We are pleased to quote for the
supply of the following:

Quantity Description Code No. Price each

12 4pcs Cookware COOK002 RM400
6 30pcs Cutlery Sets CUTL001 RM100
12 12pcs Frying Pans FRYP004 RM550

Delivery: 6 weeks from receipt of your order.

Terms : Strictly net with payment within 30 days from date of
invoice.
Prices : Include delivery to your works in one consignment.

Sales Manager
PURCHASE
ORDER - BUYER

• If a company decided to buy from the

supplier, they will issue a purchase order.
• The document contains:
– Name & add of supplier
– Purchase order number
– Date of order
– Details of goods/services ordered
– Quantity required
– Delivery time
– Authorized signature
PURCHASE ORDER
• Important because:
PURCHASE
ORDER
PURCHASE ORDER

1667 133nd St
College Point, NY 11356

Telephone: 818 838 8800 Order No.: ST 6032

Fax : 818 838 8801 Date: 5 May 2013

1524 132nd St
College Point, NY 11356
Telephone: 718 939 6400
Fax: 718 939 6401
Please supply the following:

Quantity Description Code No. Price each

12 4pcs Cookware COOK002 RM400
6 30pcs Cutlery Sets CUTL001 RM100
12 12pcs Frying Pans FRYP004 RM550

Delivery required: by end of May 2013 to our works.

If there are any queries regarding this order please contact the undersigned
immediately.

Buyer
ADVICE NOTE –
SELLER/SUPPLIER
• Send to buyer before goods are despatched.
ADVICE
NOTE

1524 132nd St
College Point, NY 11356
Telephone: 718 939 6400
Fax: 718 939 6401

1667 133nd St Date: 10 May 2013

College Point, NY 11356 Our Ref.: 2013

Your order No: ST 6032

ADVICE NOTE

We have today despatched the items shown below by CityLink Transport

Quantity Description Code No.

12 4pcs Cookware COOK002
6 30pcs Cutlery Sets CUTL001
12 12pcs Frying Pans FRYP004

Please advise us if the goods have not been received within 3 days.
DELIVERY NOTE –
SELLER/SUPPLIER

• Will be prepared by supplier once they are

ready to send the goods.
• Contains:
– Name & add of buyer
– Date & number of customer’s purchase order
– Details of goods being send
– Quantity supplied
– Delivery address & any relevant instructions
DELIVERY
NOTE

1524 132nd St
College Point, NY 11356
Telephone: 718 939 6400
Fax: 718 939 6401

1667 133nd St Date: 10 May 2013

College Point, NY 11356 Our Ref.: 2013

Your Order No: ST 6032

DELIVERY NOTE
Please receive the following:

Quantity Description Code No.

12 4pcs Cookware COOK002
6 30pcs Cutlery Sets CUTL001
12 12pcs Frying Pans FRYP004

Would you please acknowledge receipt of the goods by signing this note and pass
accompanying copy the driver making the delivery.

Received by: Date: 13 M ay 2 013

INVOICE – SELLER/SUPPLIER
• Contains:
– Seller’s name & add
– Buyer’s name & add
– Date of delivery
– Description of goods & services
– Quantity
– Price per item
– Total amount due
– Terms & conditions of sale
INVOICE

1524 132nd St
College Point, NY 11356
Telephone: 718 939 6400
Fax: 718 939 6401
Invoice to

1667 133nd St Invoice No.: 5/232

College Point, NY 11356 Advice Note: 2432

Your order No: ST 6032 Date: 10 May 2013

Quantity Description Code No. Price each Amount

RM RM
12 4pcs Cookware COOK002 400 4,800
6 30pcs Cutlery Sets CUTL001 100 600
12 12pcs Frying Pans FRYP004 550 6,600
Amount due 12,000

Terms: Strictly net within 1 month

E & OE
RETURNS NOTE - BUYER
• If goods received are damaged, faulty or not
to specification ordered, buyer will returned
the goods back to supplier with returns note
• Should include:
– Details of goods being returned
– Reason of goods being returned
– Details of the order number, date, etc.
RETURNS
NOTE
RETURNS NOTE

1667 133nd St
College Point, NY 11356

Telephone: 818 838 8800 Return note no.: 1186

Fax : 818 838 8801 Date: 15 May 2013

1524 132nd St
College Point, NY 11356
Telephone: 718 939 6400
Fax: 718 939 6401

We have today returned the following goods:

2 of 12 pcs Frying Pans, FRYP004

Returned as agreed between our Ms. Taylor Swift and your Mr. Taylor Lautner due
to the frying pan being rusty.

Inspection Department
CREDIT NOTE –
SELLER/SUPPLIER
• Usually will be printed in red
• This will indicate that the amount owed by
buyer will be reduced
CREDIT
NOTE
CREDIT NOTE

1524 132nd St
College Point, NY 11356
Telephone: 718 939 6400
Fax: 718 939 6401

Credit Note No.: 532/00

1667 133nd St Invoice No.: 5/232
College Point, NY 11356 Your Ref.: 1186

Your order No: ST 6032 Date: 20 May 2013

Quantity Description Code No. Price each Amount

RM RM
2 12pcs Frying Pans FRYP004 550 1,100

Goods returned as faulty.

Amount credited 1,100
STATEMENT OF ACCOUNT –
SELLER/SUPPLIER
• Will be send to buyer every end of each
month
• Contain details of all buyer’s transactions
during the previous month
STATEMENT OF
ACCOUNTS
STATEMENT OF ACCOUNT

1524 132nd St
College Point, NY 11356
Telephone: 718 939 6400
Fax: 718 939 6401

1667 133nd St
College Point, NY 11356
Statement date: 31 May 2013
Account number: 2432
Page number: 1

Date Reference Debit Credit Balance

RM RM RM
30/4/13 Bal. from previous statement 900
10/5/13 Invoice No. 5/232 12,000 12,900
11/5/13 Payment received 900 12,000
20/5/13 Credit note No 532/00 1,100 10,900
Total outstanding 10,900
Terms: Strictly net 30 days from date of invoice
Payment due 30/6/2013

E & EO
REMITTANCE ADVICE - BUYER
• Sends to seller when making a payment.
REMITTANCE
ADVICE
REMITTANCE ADVICE

1667 133nd St
College Point, NY 11356

Telephone: 818 838 8800 Remittance advice : 6/962

Fax : 818 838 8801 Date: 28 June 2013

1524 132nd St Account No: 2432

College Point, NY 11356
Telephone: 718 939 6400
Fax: 718 939 6401

Date Invoice Invoice Credit Payment

Note
RM RM RM
10/5/2013 5/2322 12,000 12,000
20/5/2013 532/00 1,100 (1,100)
Total Payment 10,900
ABBREVIATION

Carriage paid Another word for carriage is

transport costs. Thus carriage
paid indicates that the cost of
transport has been included in
the cost of the goods.

COD This abbreviation stands for ‘cash

on delivery’ and means that the
goods must be paid for on
delivery.
E&OE On some invoices and other
documents you will see the
initials ‘E & OE’ printed at the
bottom of the invoice. This
abbreviation stands for ‘errors
and omissions excepted’.
Basically, this is a warning that
there may possibly be errors or
omissions which could mean that
the figures shown could be
incorrect, and that the recipient
should check the figures carefully
before taking any action
concerning them.
Ex works This means that the price of the
goods does not include delivery
costs.
Net monthly This phrase frequently appears at
the foot of an invoice is due for
payment within one month of
the date of the invoice.