After looking at the theoretical concepts which underpin accountancy we will now begin to look at the documents and practices which are implemented in most working environments. Most financial transactions start off from a similar position, especially when that transaction concerns the transfer of goods from one business, or person, to another. This usually begins with an order.
As soon as one party has indicated that they wish to buy an item they will be asked to place an order. Prior to this there may have been enquires as to the availability, price and details of a particular product. This is the first point when the sale will have been formalised. Both parties will usually ask for forms to be completed containing the details of the sale. This is to avoid any potential disputes later.
If a customer is happy following initial informal enquiries, they will usually raise a formal order at their end. This is called the purchase order. This will generate a unique sequential order number and also contain the details which will have been discussed during the informal stage (i.e price, delivery date, and discounts etc).
Both parties will generate a unique reference from their internal system which the other party will be expected to use when dealing with the order. This is clearly define this order from any other which the company may be working on at any one time.
A purchase order could look like the following.
This document is designed to let the seller know exactly what the buyer wants so there can be no confusion at a later point. By the same design, the selling company will have the buyer fill out a sales order form. This will contain a lot of the same information except the unique reference number will identify it in the seller accounting system.
These two documents allow both parties to have paper evidence of what was expected should a dispute arise further down the line.
There is a third document which is created, this time by the seller which has the same affect. This is called the delivery note. It does not contain financial information, just the product details and quantity. This document is carried with the goods, and when the goods are delivered the customer signs to say they have received the items. This is sometimes called a Proof of Delivery. This is usually a form which is produced in duplicate (or even sometime triplicate) so that both parties can keep a copy for later reference. It proves what was delivered and when.
A delivery note could look like this.
This signature would be used as proof should the customer say that they never received the goods.
The purpose of all of the documents it to avoid confusion and also prevent there being any disputes in the future. No company wants to have disputes so anything which can minimise the chances of this will be utilised.