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E & O. E
Means Error and Omission expected. This is printed on documents (Invoice, credit note and debit note).
It gives sellers the right to correct an invoice should be discover an error at a later date.
Statement (statement of account). Is a document sent by sellers to buyers (debtors) at periodical intervals normally every month showing the transaction which have taken place since the last statement date.
It shows the
It shows the date, particulars debits and credit transactions and final balance for every transaction.
It enables the buyer to compare reconcile entries in books
It notifies the buyer to pay the money soon.
Account sales. Is a statement rendered normally by an agent to his principal setting out details of transactions completed on behalf of his principal.
It shows total sales, expenses incurred commission deducted, net balance to be remitted to the principal.
DOCUMENT RELATED TO PAYMENT FOR THE GOODS
Receipt: is the document which proves the receipt of payment (income received).
– On receipt of statement of account or invoice the buyer has to pay money when the seller receives money issues the receipt to the buyer for cash or cheque
– It shows name of supplier, Price, goods description, total amount paid –Extra 1 (discuss)
TERMS OF PAYMENT
Trade transactions can be cash transaction or credit transactions
- CASH TERM:-Is when a customer pays cash when the goods are sold to him.
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– Cash term can be.
a) Spot cash: Is when the buyer pays for the goods when he collects them from the sellers shop or premises.
b) Cash with order: Is when the buyer pays for the goods when he makes order
c) Cash on delivery: is when the seller collects money when he delivers goods to the buyers premises or shop
d) Prompt cash: Is when cash is paid within few days after the delivery of goods.
e) Credit terms: Is when customer makes payment for the goods after a specific period from the date of delivery.
– Credit terms can be
a) Trade credit (monthly credit). This is between manufacturers, wholesalers and retailers where payment is made at the end of the month.
– Trade discounts and cash discounts are also allowed
b) Consumer credit: Is that credit given to consumers (normally by retailers) consumer credit can:-
I. Short term credit: These are usually arranged informally:-
- Simple credit: Extended to customer by retailer for a short period of time usually one week. Customers take goods without paying for them and pay after seven days
- Credit account: customer are allowed to take goods at any time and pay at the end of the month
- Revolving credit (Budget account): This is offered by large scale retailers where a customer make cash payment (initial deposit) and then allowed to take goods exceeding the initial deposit but up to a certain limit provided he keeps the agreed amount in his account
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II. Long term credit (extended credit): This involves formal arrangements where legal contracts are involved end items of high value are involved.
- They are of two types.
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a) Credit sale or deferred payments
b) Hire purchase
Means of payment: The buyer pays the seller in various forms:-
a) Cash: By use of currency (notes and coins)
b) Instruments of credit like cheques, Bank draft or bill of exchange, Promissory note
c) Through Post Office: By the use of money orders, postal orders, postal stamps registered mail.
Assignment:
What do you understand by:
a) Debit card
b) Credit card
c) Consignment note
d) Advice note
e) Damage or return note.
Terms of delivery:
- Carry PD: The seller is responsible for the delivery of the goods to the buyer’s premises that is seller pays costs of delivery on behalf of buyer.
- Carriage forward (carr fwd): This is where the buyer pays for carriage, the seller can arrange delivery.
- Low (ex-warehouse price): Buyer will have to meet all the expenses and arranges for delivery for taking the goods from the warehouse of the seller.
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CREDIT CONTROL: Is a deliberate move by a business to satisfy itself on the credit status (credit worthiness) of a buyer:-
- Before granting credit to the buyer the trader inquiry (credit status inquiry) on the credit worthiness of the buyer
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Source of information
- Trade reference:- The person requesting for credit facilities for the first time will be asked to supply the names of persons and firms with whom they have previously done business then information on customers credit worthiness can be obtained e.g. other customer supplies.
- Bank references: The customer may be required to give the name and address of his banker. The bank will usually give information to a sellers bank (not the seller) about the customer’s financial position and integrity.
- Credit inquiry agencies: Specialized institutions in provision of information about customers upon payment of commission example about customer’s business standing.
- Trade associations or chamber of commerce. A trader can ask for confidential information and integrity of prospective customers for customers who are members of such trade associations or chamber of commerce.
- Consumers associations: they usually have enough information on the credit status of the members
- Other customers: The trader can ask for his regular customer who know the prospective customers on credit worthiness and habits
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Problems of internal trade in Tanzania
- Lack of enough capital: Most traders does lack capital both for starting and expanding business.
- Poor transport and communication: Especially in remote rural areas, this hinders timely delivery of goods or services and lead low production poor warehouse facilities. Most goods are poorly warehoused and sometimes no warehouses at all this affects the quality of goods lack of business skills. Many traders lack business skills like accounting, finance, marketing this weakens their performance especially in competitive market.
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