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This is a Credit Sales, Business Document and Bookkeeping Question - Junior Cycle Business Studies - Question 2 - 2007
Question 2
This is a Credit Sales, Business Document and Bookkeeping Question. Answer all parts of this question: The following quotation was received by Martin Banner, Purch... show full transcript
Worked Solution & Example Answer:This is a Credit Sales, Business Document and Bookkeeping Question - Junior Cycle Business Studies - Question 2 - 2007
Step 1
Explain each of the following terms: VAT, Trade Discount.
Answer
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VAT (Value Added Tax): VAT is a type of indirect tax that is imposed on the sale of goods and services. It is charged at each stage of the production and distribution process. The end consumer ultimately bears this tax. For example, if a business buys a product for €100 with a 21% VAT, they pay €121 in total but can reclaim the VAT when they sell it, thus passing this tax along the supply chain.
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Trade Discount: A trade discount refers to a reduction in the listed price of goods or services offered by a supplier to a buyer. It is a common practice in business-to-business transactions and is often provided based on the volume of goods purchased or to encourage prompt payments. For instance, if the listed price of a door is €200 and a 20% trade discount is given, the buyer pays €160.
Step 2
What procedures would you recommend to DOORS FOR ALL OCCASIONS Ltd when preparing and processing quotations?
Answer
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Standardization of Quotation Templates: Utilize a standardized format for quotations that includes all necessary details such as item descriptions, quantities, unit prices, total amounts, applicable taxes, and payment terms. This ensures consistency and clarity in all quotations sent to customers.
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Double-Checking Calculations: All figures in the quotation should be carefully reviewed for accuracy to avoid errors in pricing, quantities, or tax calculations. A second person should ideally verify these calculations before sending out quotations to customers.
Step 3
Martin Banner considers himself to be an effective purchasing manager. What does effective purchasing involve?
Answer
Effective purchasing involves several key components:
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Supplier Evaluation and Selection: Research and assess suppliers to ensure quality, reliability, and competitive pricing.
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Negotiation Skills: Obtain the best terms and prices through careful negotiation with suppliers.
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Cost Management: Monitor and control operational costs related to purchasing to maximize profitability.
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Inventory Management: Maintain optimal inventory levels to reduce holding costs while ensuring product availability.
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Relationship Management: Build and maintain positive relationships with suppliers to promote cooperation and favorable terms.
Step 4
State two other reasons why Martin Banner might have cause to complain to Joan Shannon.
Answer
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Quality Issues: If the delivered doors did not meet the specifications outlined in the original quotation, such as being the incorrect material or size, Martin Banner might have grounds for complaint.
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Delayed Delivery: If the doors were not delivered on the agreed date, resulting in project delays for HOMEFIT Ltd, this could lead to a complaint.
Step 5
Complete the blank Credit Note No. 23 on the sheet supplied with this paper.
Answer
Credit Note No. 23
- Date Issued: 1 June 2007
- Correct Recipient: HOMEFIT Ltd, Kilkee, Co. Clare
- Description of Goods Returned: 5 Exterior Teak Doors due to scratching
- Original Order No.: 100
- Total Amount Credited: €1,000 (€200 each for 5 doors)
- Reason for Credit Note: Faulty Goods
Step 6
Record the Credit Note issued in the Sales Returns Book of DOORS FOR ALL OCCASIONS Ltd on the sheet supplied with this paper.
Answer
Sales Returns Book Entry:
- Date: 1 June 2007
- Credit Note No.: 23
- Customer Name and Address: HOMEFIT Ltd, Kilkee, Co. Clare
- Correct Order No.: 100
- Description: Return of 5 Exterior Teak Doors
- Amount: €1,000
- Reason for Return: Badly Scratched Doors