CHAPTER FOUR
DOCUMENTS USED IN HOME TRADE AND MEANS OF PAYMENT
A business document is a written record which gives evidence to a stage in the transfer of goods or provision of
services from one party or it is written record which gives evidence that trader or a business transaction has taken
place.
A business transaction is a deal between two or more people involving exchange of goods and services in terms of
money.
Business transaction may take place on cash basis; in which case goods are paid for before or on delivery or a short
while after delivery
Business transaction may also take place on credit basis; which means payment is made after a specified period
from the date of delivery of the goods or the provision of the services
There are various business documents that are used in various stages of business transactions as discussed below;
a) Documents used at the inquiry stage
This is the first stage in transaction. An inquiry is a request by a prospective buyer for information on available
goods and services. It is aimed at establishing the following;
Whether the goods or services required are available for sale
The quality or nature of the products available
The prices at which the goods or services are being sold
The terms of sale in respect to payment and delivery of goods or services
Some of the documents used at this stage include;
i) Letter of inquiry;
This is a letter written by a potential buyer to the seller to find out the goods and services offered by the seller.
A letter of inquiry can be general or specific. A specific letter of inquiry seeks for information about a particular
product.
Reply to an inquiry
The seller may reply to the letter of inquiry by sending any of the following documents;
1. Price list
2. A catalogue
3. Quotation
4. A tender
i) A price list
This is a list of items sold by the trader together with their prices. The information contained in a price list is usually
brief and not illustrated and may include;
1. Name and address of the seller
2. List of the goods and services
3. The recommended unit prices of the products
4. Any discounts offered
Price list show the prices of the commodities at that time.
ii) A catalogue;
A catalogue is a basket which briefly describes the goods a seller stocks.It is normally sent by the seller to the buyer
when the buyer sends a general letter of inquiry. It usually carries illustrations on the goods stocked, and could be in
the form of attractive and colorful pictures
The content of a catalogue includes the following;
Name and address of the seller
Details of the products to be sold; inform of pictures and illustrations
The prices of the products
After-sales services offered by the seller
Packaging and posting expenses to be incurred
Delivery services to be used
Terms of sale
Catalogues carry more information than the price list and they are more expensive to print.
c) Quotation; this is a document sent by a seller to a buyer in response to a specific letter of inquiry. It specifies the
conditions and terms under which the seller is willing to supply the specified goods and services to the buyer.
The content of a quotation includes the following;
COMMERCE COURSE NOTES CHAPTER 4 – DOCUMENTS USED IN TRADE PREPARED BY MR. ANTONY AMBIA Page 1
, Name and address of seller
Name and address of the buyer
Description of goods to be supplied
Prices of the commodities
Terms of sale i.e. discounts, time of supply, delivery
Total of the goods to be supplied
Quotations are normally in form of letters, but many large scale businesses have pre-printed quotations forms which
they readily send to the potential customers.
d) A Tender
This is a document of offer to sell sent by a seller to a buyer in response to an advertised request
Tenders contain the following;
Date when the tender advertisement was made
Mode of payment
Date of making document
Discounts given
Name and address of prospective seller called the tenderer
The prices at which the goods can be provided
Period of delivery
Mode of delivery
Tenders are delivered in sealed envelopes which are opened by the buyer on a specified date
The winning tender is usually awarded on the of the lowest quoted price although the buyer is not obliged to accept
this especially if quality is likely to be low
Tenders are not binding unless accepted by the buyer.
b) Documents used at the order stage
After receiving replies to inquiry in form of price list, catalogue or Quotation, a prospective buyer will study the
terms and conditions stated in them, and then may decide to buy products or not.
i) An Order
If a prospective buyer decides to purchase an item(s), he or she then places an order
An order is a document sent by a potential buyer to a seller requesting to be provided with specified products under
specified terms and conditions
An order issued for goods is called a local purchase order (LPO)
An order issued for services is called a local service order (LSO)
Ways of making an order
1. Filling an order form. This is a pre-printed document that is used for making orders
2. Writing an order letter
3. Sending an e-mail, faxing or sending a short text message
4. Giving a verbal order. Verbal orders have the disadvantage in that they can be misunderstood and there
would be no record of items ordered
Where written orders are made, the potential buyer keeps a copy of the order for use in verifying the goods ordered
when they are delivered.
A written order may contain the following;
Name and address of the buyer
COMMERCE COURSE NOTES CHAPTER 4 – DOCUMENTS USED IN TRADE PREPARED BY MR. ANTONY AMBIA Page 2
, Name and address of the seller
The number of the order
Quantities ordered and total amount to be paid
Description of the goods ordered
Price per item
Special instructions on such matters as packaging and delivery
ii) Acknowledgement note
On receiving the order, the seller sends the buyer an acknowledgement note
An acknowledgement note is a document sent by the seller to the prospective buyer to inform him/her that the order
has been received and it is being acted upon.
After sending the acknowledgement note, the seller has to decide whether to extend credit to the buyer or not. At
this stage, the seller has the following options;
1. If the seller is convinced that the buyer is credit worthy, arrangements are made to deliver the ordered
goods or services to the buyer.
2. If the seller is not sure of credit worthiness of the buyer, a credit status inquiry can be issued to the
buyer’s bankers or to other suppliers who deal with the buyer to ascertain the credit worthiness.
3. If the buyer is not creditworthy, then a polite note or a proforma invoice can be sent to him/her
A proforma invoice
This is a document sent by the seller to the buyer requesting the buyer to make payment for goods or services before
they are delivered. It indicates that the seller is not willing to grant the buyer credit
Functions of a proforma invoice
1. A polite way of asking for payment before the goods are delivered
2. Sent when the seller does not want to give credit
3. Used by importers to get customers clearance before goods are delivered
4. Issued to an agent who sells goods on behalf of the seller
5. Show what the buyer would have to pay if the order is approved
6. Can be used to serve as a quotation
Circumstances under which a pro-forma invoice may be used
If the seller does not want to give credit
If the seller wants to sell goods through an agent
If the seller wants to get clearance for imported goods
If the seller wants it to function as a quotation
If the seller wants to inform the buyer what he/she pay if the order is approved etc.
Documents used at the Delivery stage
After the seller has accepted the order sent an acknowledgement note and where necessary the pro-forma invoice,
the seller then prepares the goods for delivery to the buyer. This can be done in the following ways;
The seller can ask the buyer to collect the goods
The seller can deliver the goods to the buyer using his/her own means of transport
The goods can be delivered to the buyer through public transport
The services(s) can be rendered to the buyer at the sellers or the buyer’s premises or at any convenient
place.
The main documents that are used at this stage are;
i) Packing note; before delivery goods are packed for dispatch. This is a document prepared by the seller showing
the goods contained/packed in every container, box or carton being delivered to the buyer. A copy of the packing
note is packed with the goods to make/help the buyer have a spot check.
The contents of a packing note include;
Description of goods packed
Quantities of goods packed
The means of delivery
A packing not does not contain prices of goods. This ensures that those people involved in checking and transporting
goods do not know the value of goods. This is done as a precaution against theft.
ii) Advice note; this is a document sent by the seller to the buyer to inform the buyer that the ordered goods have
been dispatched. It is usually sent through the fastest means possible.
It contains the following;
The means of delivery
COMMERCE COURSE NOTES CHAPTER 4 – DOCUMENTS USED IN TRADE PREPARED BY MR. ANTONY AMBIA Page 3
DOCUMENTS USED IN HOME TRADE AND MEANS OF PAYMENT
A business document is a written record which gives evidence to a stage in the transfer of goods or provision of
services from one party or it is written record which gives evidence that trader or a business transaction has taken
place.
A business transaction is a deal between two or more people involving exchange of goods and services in terms of
money.
Business transaction may take place on cash basis; in which case goods are paid for before or on delivery or a short
while after delivery
Business transaction may also take place on credit basis; which means payment is made after a specified period
from the date of delivery of the goods or the provision of the services
There are various business documents that are used in various stages of business transactions as discussed below;
a) Documents used at the inquiry stage
This is the first stage in transaction. An inquiry is a request by a prospective buyer for information on available
goods and services. It is aimed at establishing the following;
Whether the goods or services required are available for sale
The quality or nature of the products available
The prices at which the goods or services are being sold
The terms of sale in respect to payment and delivery of goods or services
Some of the documents used at this stage include;
i) Letter of inquiry;
This is a letter written by a potential buyer to the seller to find out the goods and services offered by the seller.
A letter of inquiry can be general or specific. A specific letter of inquiry seeks for information about a particular
product.
Reply to an inquiry
The seller may reply to the letter of inquiry by sending any of the following documents;
1. Price list
2. A catalogue
3. Quotation
4. A tender
i) A price list
This is a list of items sold by the trader together with their prices. The information contained in a price list is usually
brief and not illustrated and may include;
1. Name and address of the seller
2. List of the goods and services
3. The recommended unit prices of the products
4. Any discounts offered
Price list show the prices of the commodities at that time.
ii) A catalogue;
A catalogue is a basket which briefly describes the goods a seller stocks.It is normally sent by the seller to the buyer
when the buyer sends a general letter of inquiry. It usually carries illustrations on the goods stocked, and could be in
the form of attractive and colorful pictures
The content of a catalogue includes the following;
Name and address of the seller
Details of the products to be sold; inform of pictures and illustrations
The prices of the products
After-sales services offered by the seller
Packaging and posting expenses to be incurred
Delivery services to be used
Terms of sale
Catalogues carry more information than the price list and they are more expensive to print.
c) Quotation; this is a document sent by a seller to a buyer in response to a specific letter of inquiry. It specifies the
conditions and terms under which the seller is willing to supply the specified goods and services to the buyer.
The content of a quotation includes the following;
COMMERCE COURSE NOTES CHAPTER 4 – DOCUMENTS USED IN TRADE PREPARED BY MR. ANTONY AMBIA Page 1
, Name and address of seller
Name and address of the buyer
Description of goods to be supplied
Prices of the commodities
Terms of sale i.e. discounts, time of supply, delivery
Total of the goods to be supplied
Quotations are normally in form of letters, but many large scale businesses have pre-printed quotations forms which
they readily send to the potential customers.
d) A Tender
This is a document of offer to sell sent by a seller to a buyer in response to an advertised request
Tenders contain the following;
Date when the tender advertisement was made
Mode of payment
Date of making document
Discounts given
Name and address of prospective seller called the tenderer
The prices at which the goods can be provided
Period of delivery
Mode of delivery
Tenders are delivered in sealed envelopes which are opened by the buyer on a specified date
The winning tender is usually awarded on the of the lowest quoted price although the buyer is not obliged to accept
this especially if quality is likely to be low
Tenders are not binding unless accepted by the buyer.
b) Documents used at the order stage
After receiving replies to inquiry in form of price list, catalogue or Quotation, a prospective buyer will study the
terms and conditions stated in them, and then may decide to buy products or not.
i) An Order
If a prospective buyer decides to purchase an item(s), he or she then places an order
An order is a document sent by a potential buyer to a seller requesting to be provided with specified products under
specified terms and conditions
An order issued for goods is called a local purchase order (LPO)
An order issued for services is called a local service order (LSO)
Ways of making an order
1. Filling an order form. This is a pre-printed document that is used for making orders
2. Writing an order letter
3. Sending an e-mail, faxing or sending a short text message
4. Giving a verbal order. Verbal orders have the disadvantage in that they can be misunderstood and there
would be no record of items ordered
Where written orders are made, the potential buyer keeps a copy of the order for use in verifying the goods ordered
when they are delivered.
A written order may contain the following;
Name and address of the buyer
COMMERCE COURSE NOTES CHAPTER 4 – DOCUMENTS USED IN TRADE PREPARED BY MR. ANTONY AMBIA Page 2
, Name and address of the seller
The number of the order
Quantities ordered and total amount to be paid
Description of the goods ordered
Price per item
Special instructions on such matters as packaging and delivery
ii) Acknowledgement note
On receiving the order, the seller sends the buyer an acknowledgement note
An acknowledgement note is a document sent by the seller to the prospective buyer to inform him/her that the order
has been received and it is being acted upon.
After sending the acknowledgement note, the seller has to decide whether to extend credit to the buyer or not. At
this stage, the seller has the following options;
1. If the seller is convinced that the buyer is credit worthy, arrangements are made to deliver the ordered
goods or services to the buyer.
2. If the seller is not sure of credit worthiness of the buyer, a credit status inquiry can be issued to the
buyer’s bankers or to other suppliers who deal with the buyer to ascertain the credit worthiness.
3. If the buyer is not creditworthy, then a polite note or a proforma invoice can be sent to him/her
A proforma invoice
This is a document sent by the seller to the buyer requesting the buyer to make payment for goods or services before
they are delivered. It indicates that the seller is not willing to grant the buyer credit
Functions of a proforma invoice
1. A polite way of asking for payment before the goods are delivered
2. Sent when the seller does not want to give credit
3. Used by importers to get customers clearance before goods are delivered
4. Issued to an agent who sells goods on behalf of the seller
5. Show what the buyer would have to pay if the order is approved
6. Can be used to serve as a quotation
Circumstances under which a pro-forma invoice may be used
If the seller does not want to give credit
If the seller wants to sell goods through an agent
If the seller wants to get clearance for imported goods
If the seller wants it to function as a quotation
If the seller wants to inform the buyer what he/she pay if the order is approved etc.
Documents used at the Delivery stage
After the seller has accepted the order sent an acknowledgement note and where necessary the pro-forma invoice,
the seller then prepares the goods for delivery to the buyer. This can be done in the following ways;
The seller can ask the buyer to collect the goods
The seller can deliver the goods to the buyer using his/her own means of transport
The goods can be delivered to the buyer through public transport
The services(s) can be rendered to the buyer at the sellers or the buyer’s premises or at any convenient
place.
The main documents that are used at this stage are;
i) Packing note; before delivery goods are packed for dispatch. This is a document prepared by the seller showing
the goods contained/packed in every container, box or carton being delivered to the buyer. A copy of the packing
note is packed with the goods to make/help the buyer have a spot check.
The contents of a packing note include;
Description of goods packed
Quantities of goods packed
The means of delivery
A packing not does not contain prices of goods. This ensures that those people involved in checking and transporting
goods do not know the value of goods. This is done as a precaution against theft.
ii) Advice note; this is a document sent by the seller to the buyer to inform the buyer that the ordered goods have
been dispatched. It is usually sent through the fastest means possible.
It contains the following;
The means of delivery
COMMERCE COURSE NOTES CHAPTER 4 – DOCUMENTS USED IN TRADE PREPARED BY MR. ANTONY AMBIA Page 3
