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The buyer may require a quote from different sellers for the items it wants to buy. The quotes will be looked at, discussed and a decision made as to which seller to buy the product from, usually based on who is the cheapest. After that an order will be placed and the winning supplier will turn the quote into a sales invoice.

2. Orders
When a business needs to buy an item it will complete an order form. The order form may be as simple as an A5 sheet from a duplicate book, or it may be a form supplied by the seller through its on-line website or catalogue. Order forms will not always show the cost because the buyer may not know the cost when placing an order.

3. Delivery Dockets
In many cases the vendor will provide a delivery docket with the items being shipped, posted or delivered. These will often have a description of items being delivered so the buyer can check it against their order immediately upon it’s arrival.

4. Sales and Purchase Invoices
When an item is sold the seller will issue a document providing all the details of the sale. If the seller does not expect cash up front before sending the item, they will state on their invoice their payment terms i.e. the length of time the buyer has until it’s time to pay. One example is for payment to be received no later than 30th of the month following the date of invoice.The seller enters the document into their system as a sales invoice. The buyer will enter it into their system as a purchase invoice.

5. Credit and Debit Notes
If the buyer decides not to keep an item but return it to the seller, the seller will issue a special note to show the amount to be refunded.In the supplier’s bookkeeping system this is called a credit note because it reduces the amount owed by the customer.In the customer’s bookkeeping system it is called a debit note because it reduces how much they owe to the seller.

6. Payment/Remittance Advices
When a customer pays their bill they will send the supplier a remittance advice which details the amount and the invoice numbers being paid. It will be posted either with the check or by itself if payment is made by internet banking.
Remittances can often be found already printed as a small cut out section at the bottom of, or down the right hand side of, the sales/purchase invoice.

7. Checks (Cheques)
A check (cheque) is a special bank note that represents the cash that is being paid by the customer.
The check requires the signature of the person who is an authorized signatory of the bank account from which the check is issued. Each check has a special number on it which should be recorded into the bookkeeping system.
The name of the payee should be written on the check. If it is left blank anyone can fill it in with their own name and deposit the check, thus stealing the money.
Checks should be crossed across the top with the words ‘not negotiable’, and the printed words ‘or bearer’ crossed off (not all checks have this) so that the check has to be deposited into the payee’s bank account and not cashed, thus avoiding theft.


*Such errors are not disclosed by a trial balance and they are:*

1. Errors of Principle:
An error of principle is an error which violates the fundamentals of book-keeping. For instance, purchase of furniture is debited to Purchase Account, instead of Furniture Account; Wages paid for the erection of plant is debited to Wages Account, instead of Plant Account; the amount spent on extension of building is debited to Repairs Account instead of Building Account etc. These types of errors do not affect the total debits and total credits but affect the principle of book-keeping.

2. Errors of Omission:
If a transaction is completely omitted, there will be no effect on the Trial Balance. When a transaction goes completely unrecorded in both aspects or a transaction after being recorded in the books of primary entry is not at all posted in the ledger, the error is an error of omission. For instance, if a credit purchase is omitted to be recorded in the Purchase Day Book, then it will be omitted to be posted both in the Purchase Account and the Supplier’s Account. This error will not, however, result in the disagreement of Trial Balance.

3. Posting to Wrong Account:
Posting an item to wrong account, but on the correct side. For instance, if a purchase of Rs 200 from Ramu has been credited to Raman, instead of Ramu and this error will not affect the agreement of Trial Balance. Thus, Trial Balance will not detect such an error.

4. Error of Amounts in Original Book:
If an invoice for Rs 632 is entered in Sales Book as Rs 623, the Trial Balance will come out correctly, since the debit and credit have been recorded as Rs 623. The arithmetical accuracy is there, but in fact there is an error.

5. Compensating Errors:
If one account in the ledger is debited with Rs 500 less and another account in the ledger is credited Rs 500 less, these errors cancel themselves. That is, one error is neutralized by similar error on the opposite side.

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