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Home trade documents and terms of payment

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Order of documents in a transaction

  1. Letter of enquiry (buyer asks about goods, prices and terms).
  2. Quotation or price list (seller replies).
  3. Order (buyer requests goods).
  4. Advice note and delivery note (goods sent and received).
  5. Invoice (bill showing amount owed, trade discount, terms).
  6. Debit note (buyer claims an undercharge correction) or credit note (seller reduces the amount owed).
  7. Statement of account (summary at month end).
  8. Payment (cash, cheque, transfer, mobile money) and receipt.

Terms

  • Trade discount: reduction for buying in large amounts or for resale.
  • Cash discount: reduction for paying quickly.
  • C.W.O. (cash with order); C.O.D. (cash on delivery); E. & O.E. (errors and omissions excepted); carriage paid / carriage forward.

Worked example: Goods listed at US$800 are sold with 10% trade discount and 5% cash discount for payment within 7 days. Find the amount paid promptly.

Trade discount: 800 × 10% = 80 → invoice 720

Cash discount: 720 × 5% = 36 → paid 684

Exam tip: Trade discount is deducted on the invoice first; cash discount only on payment.

Check yourself

  1. Which document is sent by the seller to reduce the amount owed?
  2. What does E. & O.E. mean?
  3. Goods priced at US$500 carry 20% trade discount. Find the invoice amount.
Show answers
  1. A credit note.
  2. Errors and omissions excepted – the seller can correct mistakes later.
  3. US$400
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