Question

seven main function in the accounting system for credit sales and receip transaction with a brief description of each function

identify three documents or records that will be used by the ordering of goods function

Answer 1

seven main function in the accounting system for credit sales and receipt transaction with a brief description of each function-

1. Customer Loyalty- Providing credit helps in obtaining customer loyalty,because if the customer would need anything and don't have cash in hand he could still rely on us and hence, we gain loyalty.

2. Increase in sales - It helps in improving sales, as said earlier, it is quite useful tool, if the customer doesn't have cash in hand, he could still buy the goods which he would not have been able to if he there were no credit facility available, and thereby helps in increasing sales.

3. It gives competitive edge over others - This means if our business is giving credit versus those who are providing no credit or is providing longer term period v/s shorter period.

4. It increases income for business- It definetly increases sales but other incomes like penalties on late payment can be charged from customer, interest can also be charged for longer period of credit, etc.

5. Expanding customer base- This helps to attract more potential buyers, who may not buy in cash sales due to poor liquidity.

6. Increases overall spending by customer - It encourages customers to increase the total amount of their spending. If customer's don't have to pay the money at a later stage, they might not be concerned about the cost.

7. Helps in disposing slow moving goods- Those goods which aren't frequently demand gets piled up and blocks money, credit sales acts as a tool to move it faster.

identify three documents or records that will be used by the ordering of goods function

1. Purchase Order-  It is issued by buyer to seller, mentioning the type, desciption and quantities of goods required.

2. Delivery Note-  It is a document that accompanys shipment of goods which specifies the type of goods, its description and quantity of the goods delivered. A copy of the same is signed by the buyer, and its sent back to seller as a proof of delivery.

3. Invoice -It is issued by seller to buyer, stating goods ordered, quantity and price, and the sum payable after discounts (if any)