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                  Trade documents are also known as business documents. These are written records that provide the details of the transaction between the buyer and the seller.
Importance or Needs of trade documents
       1. It provides written record of transactions that have taken place.
       2. It helps to maintain books of accounts.
       3. It helps to assess the rate of tax and revenue.
       4. It helps the government to publish statistics regarding the business activities.

Contents of Business documents

A business document may have the following features or information
       1. Date of issue.
       2. Date of transactions
       3. Nature of transactions (goods)
       4. Name of the parties
       5. Amount of transactions                       
       6. Terms and conditions of transaction
       7. Serial number.
According to the types of trade, different documents are used.
Documents used in Home trade

1. Letter of enquiry

                     It is a document sent by the buyer to the seller to find about the goods required, their availability, their prices, quantity and the terms of payment. The buyer can send a number of letters to various sellers to find best goods at lower prices.

2. Quotation

                     It is sent by the seller to the buyer in reply of the letter of enquiry. It provides all the relevant information required by the buyer which has been mentioned in the letter of enquiry. It shows the types of goods, their brands, their respective prices, the terms of delivery, the terms of payment, etc
3. Catalogue
                     Sometimes, instead of sending a quotation, the seller may send a catalogue to the buyers containing detailed and classified information of the various types of goods offered for sale. It is similar to quotation but prices are not quoted there in. It can be used as an advertisement medium.

4. Order

            Purchase order is sent by the buyer to the seller to place an order for buying the goods regarding the quotation.  It states the type, brand, quantity and price of the goods (as given in the quotation) as well as the terms of delivery, the terms of payment, the expected delivery date and the address to which the goods are to be sent.

5. Invoice

                     It is sent by the seller to the buyer to inform the buyer about the amount due on the goods supplied, stating also the type, quantity, price and terms of payment. It is used for the goods sold on credit. It is a very important document used for accounting entries.

6. Advice note

            It is sent by the seller to the buyer to inform the buyer that the goods have been dispatched. It shows the quantity of the goods and the date of dispatch.

7. Delivery note

                     It is sent by the seller to the buyer along with the goods to confirm the delivery of goods. It is sent through the delivery van driver and the buyer has to sign on it after the goods are received in good condition.
8. Consignment note
                     It is similar to the delivery note. It is sent by the seller to the buyer when the goods are delivered through the hired vehicles. It is a formal instruction to the transport firm to deliver the goods to the customer. It is to be signed by the buyer for ensuring the right delivery of goods.
9. The debit note.
                     It is prepared by the seller and sent to the buyer who has been undercharged on an invoice. It is an additional invoice sent to the buyer to pay the short amount. It informs the buyer that his account is debited, increasing the amount that he owes.
                     Reasons for issuing a debit note.
                     -If there has been an undercharge on an invoice
                -If some charges like delivery, packing, loading, etc. have not been included in the invoice.
10. The credit note
             It is prepared by the seller and sent to the buyer who has been overcharged on an invoice. The credit note is normally printed in red to distinguish it from other documents. It is sent to the buyer to deduct the over charged amount in the invoice. It informs the buyer that his account is credited, decreasing the amount that he owes.

Reasons for issuing a credit note
-If there has been an overcharge on an invoice
-If damaged goods have been returned by the buyer.
-If the goods are short delivered to the buyer.
-If the buyer has returned gift vouchers or coupons to the seller.
12. Cheque/draft (Mode of payment)
                     The cheque or draft should be sent by the buyer to the seller in the given period to settle the due amount mentioned in the invoice. Nowadays the traditional payment method is replaced by the online payment using cash cards.

13. Receipt

            It is issued by the seller to the buyer as a proof of the money received.  When the payment is made by cheque, it is not necessary to issue a receipt since the cheque serves as a proof of payment.

14. Statement of account.

            It is sent by the seller to the buyer showing the summary of the transactions between the buyer and the seller for a particular period of time. It shows the amount of goods purchased, the returns made, the payments, cash discounts, details of the credit note, debit note and the amount due.
1. Indent or order.
            The order for the goods placed by the importer to the exporter or his agent is known as indent. It shows the nature of products, quantity, shipping mark, etc.
2. Bill of lading
            Bill of lading is an important documents used in foreign trade when the goods are sent through the ships. It contains the details of the goods, details of the consignor and the ship which carries the goods. Bill of lading is a document of title to the goods. This means that the holder is entitled to claim the goods from the shipping authority when the ship reaches its destination.
3. Airway bill (Air consignment note)
            Air way bill is similar to bill of lading but it is used only when the goods are sent by the air. It is issued by the aircraft authority as an evidence of the contract of carriage between the exporter and the carrier. It is not a document of title to the goods.
4. Consular invoice.
            Consular invoice is issued by the consul (Foreign ambassador) of the importing country resident in the exporting country. It is issued for the purpose of reducing the falsification on the price of goods with the intention of evading the duty.
5. Certificate of insurance
            Certificate of insurance is issued by an insurance company.  In order to reduce the chance of risk, the goods must be insured with the insurance company. This certificate is enclosed with the goods if the goods have been insured properly.
6. Shipping note. (Dock receipt)
            When the goods are delivered to the docks, they are accompanied by a shipping note formally requesting the port authorities to handle them. This document furnishes the details of the goods, ship and the destination port. A copy of the note is signed by the port authority and retained by the exporter as a proof of delivery to the port; it is then referred as dock receipt.
7. Mate’s receipt.
            A receipt signed by the mate (captain or his agent of the ship) to say the cargo (goods) has been received on board in good condition after examining the goods.
8. Certificate of origin.
            It is a document stating the name of the country that produced the specified goods which are ready to export. It is often required before the importation of goods. Certificate of origin can be used to prevent the evasion of duty on goods.
9. Letter of credit.
            Letter of credit is a document issued by the importer’s bank to the exporter giving a guarantee of payment to the exporter. It can also be the source of repayment of the transaction meaning that the exporter will get paid with the redemption of the letter of credit.
10. Customs declaration form.
            This is the document issued by the customs authority in order to examine the concerned goods easily for calculating duties therein. It is to be filled by both the exporter and the importer respectively and furnishes the details of the goods.

Trade discount.
       Trade discount is discount allowed to the buyers who make bulk purchases from the seller. It is also known as quantity discount.
      Eg:- If the buyer purchases more than 100 units he will be given a 5% discount on price.

Cash discount.
      Cash discount is a discount allowed to the buyers those who make the payment on time for their purchases. It is allowed by the seller to motivate the buyers to pay the due in the given credit period of time.
      Eg:- If the buyer pays within 10 days he will be given a 6% discount.

Difference between Cash discount and Trade discount


1. This is a deduction off the invoice price of goods purchased on credit.
2. This is given to encourage prompt payment.
3. The rate of cash discount depends on the period of credit allowed.
4. The buyer loses the cash discount if he fails to pay within the given period.

5. It is treated as an expense in the ledger accounts.

1. This is a deduction off the list price of goods purchased.
2. This is given to encourage bulk purchases.
3. The rate of trade discount depends on the quantity purchased.
4. Buyer is entitled to the trade discount even if he fails to pay within the given period.
5. It does not appear in the ledger accounts.

E & OE (Errors and Omissions Excepted)
E & OE stands for the Errors and Omissions Excepted. It tells that if an error is made or something is omitted from the trade documents, the seller reserves the right to correct the mistakes.


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Unknown said...

the information on business docs is of much value.thanx.

Mary Gooven said...

I use Ideals virtual data room for data management. This is very convenient service for documents also. You may share any documents with any colleague or partner.

moeketsi mpitso said...

these notes are really very clear. I will have to encourage my students to visit this page for more information

nand Kishore said...

it is nice summarized document. It would have been better if information for dangerous goods related documents also added.

haledgr8 said...

nice one, it really help

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