Documents of transactions

Material purchase cycle:

i) Purchase requisition is prepared by the storekeeper
and authorized by the supervisor.
ii) Purchase requisition is then sent to purchase
department who sends out the Letter of enquiry to
various suppliers to enquire about the prices, delivery
time, charges, discount and terms of payment.
iii) A Letter of reply is sent by the supplier to buyer’s
purchase department which contains:
1) A catalogue (list of goods and their prices).
2) A quotation (specific prices within specific period).
3) An estimate of cost.
iv) A Purchase order is prepared by the purchase
department authorized by it’s supervisor and sent to the
supplier which specifies quantity and price of goods to
be bought. There are four copies of purchase order each
retained by:
1) The supplier.
2) The accounts department.
3) The stores section.
4) The goods received section.
v) Once the supplier receives purchase order he will issue
an Advice note to the buyer to confirm that their order
 has been received and states the timing and items of
the delivery to be made.
vi) A Delivery/Dispatch note is sent along the goods
delivered to the customer. Two copies are signed by the
customer one is kept the other retained by supplier.
vii) A Goods received note is issued when goods are
received and all calculations are confirmed before
payment is made. Four copies are retained by:
1) Accounts department (to check against the invoice).
2) Stores section.
3) Purchase department.
4) Goods received section.
viii) An Invoice is presented to the buyer’s accounts
department by the supplier’s sales department for
payment within a stated time frame and indicates what
has been purchased in what amount and for what price.
The buying company should check the quantity by
comparing the Invoice with GRN and the price by
comparing the Invoice with purchase order to make
sure the calculations are correct.
ix) If the buyer is not satisfied with the goods and the seller
agrees to take the goods back, the seller will issue a
Credit note for the items returned. The amount owed to
seller is original invoice less the credit note value.
x) A Debit note by customer is a formal request for the
issuance of credit note. It is sent by the customer along
with the goods returned.
xi) When a seller makes a mistake in calculation of invoice,
A Debit note will be issued to a customer to increase
the amount owed.
xii) A Remittance advice is sent by customer along with the
payment which shows what items are being paid for.
xiii) A Pro-forma invoice is same as an invoice but is
requested by the customer if he is not interested in
credit period or wishes to pay earlier.
xiv) An Internal cheque requisition is a form used in
business to authorize payments to suppliers.