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This is a sales, business documents and bookkeeping question - Junior Cycle Business Studies - Question 2 - 2018
Question 2
This is a sales, business documents and bookkeeping question. Answer all parts of this question: (A) (i) State two reasons why a business sells goods on credit. ... show full transcript
Worked Solution & Example Answer:This is a sales, business documents and bookkeeping question - Junior Cycle Business Studies - Question 2 - 2018
Step 1
State two reasons why a business sells goods on credit.
Answer
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To Increase Sales: By offering customers the option to purchase goods on credit, businesses can potentially increase their sales volume. Customers who may not have immediate cash on hand are more likely to make a purchase if they can pay later.
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To Accommodate Customers: Selling goods on credit allows businesses to accommodate customers who require flexibility in payment. This can strengthen customer relationships and encourage repeat purchases.
Step 2
Explain two methods that a business could use to check the credit rating of new customers.
Answer
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Obtain a Credit Reference: A business can ask new customers to provide a credit reference from another business or creditor. This information can give the business insights into the customer's creditworthiness and payment history.
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Use Credit Rating Agencies: Businesses can also employ the services of credit rating agencies, which evaluate and report on the creditworthiness of individuals and companies. These reports can help businesses make informed decisions regarding extending credit.
Step 3
State three procedures that need to be followed when processing outgoing invoices.
Answer
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Check Recipient Details: Ensure that the name and address of the recipient on the invoice are correct to prevent delivery issues.
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File a Copy of the Invoice: Maintain a filed copy of the invoice for record-keeping and future reference.
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Record in the Sales Book: Document the invoice in the Sales Book to track sales transactions accurately.
Step 4
Complete the invoice no. 56 on 16 May 2018.
Answer
CHAIRS SUPREME Ltd, Dock Road, Sligo
INVOICE No. 56
Date: 16/05/2018
FURNITURE Ltd
23 Castlebar Road
Claremorris, Co Mayo
Order No: 300
| QUANTITY | DESCRIPTION | PRICE EACH (€) | TOTAL (€) |
|---|---|---|---|
| 45 | Armchairs | 140 | 6300 |
| 25 | Bedside Lockers | 68 | 1700 |
| Total (Excluding VAT): | 8000 |
| Trade Discount (30%): | -2400 |
| Subtotal: | 5600 |
| VAT (23%): | 1288 |
| E & OE: | |
| Total (Including VAT): | 6888 |
Step 5
Complete receipt no. 55, issued by Ronan Long, Accounts Manager, on 20 May 2018.
Answer
CHAIRS SUPREME Ltd, Dock Road, Sligo
Receipt No. 55
Date: 20 May 2018
Received from: Furniture Ltd
| Description | Amount (€) |
|---|---|
| Total | 6888 |
Method of payment: Visa Debit
Received with thanks: Ronan Long
Position: Accounts Manager
Step 6