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Documents and procedure of trade

Commerce · WAEC and JAMB · SS2 and SS3

Sequence matters here. Examiners often ask which document comes next, so learn the order of a transaction.

What you need to know

  • Order of a typical transaction: enquiry, quotation, order, advice note, delivery note, invoice, statement, receipt.
  • An enquiry asks about price and terms; a quotation is the reply.
  • A pro-forma invoice is sent before supply, often to obtain advance payment or clear customs.
  • An invoice states what was supplied and what is owed. It is a demand for payment.
  • A debit note corrects an undercharge; a credit note corrects an overcharge or covers returns.
  • A statement of account summarises all transactions in a period and shows the balance due.
  • Shipping documents: bill of lading, certificate of origin, consular invoice, marine insurance certificate.
  • Terms: COD is cash on delivery; "2/10 net 30" means 2 per cent discount if paid within 10 days, otherwise full in 30.

Key terms

Bill of lading
A document issued by a shipping company that is a receipt, evidence of the contract of carriage, and a document of title.
Trade discount
A reduction given to another trader on the catalogue price, to allow them a profit margin.
Cash discount
A reduction for prompt payment, intended to speed up cash flow.

Worked example

Goods invoiced at N200,000 carry a trade discount of 10% and a cash discount of 2%. What is paid if settled promptly?

  1. Trade discount first: 10% of 200,000 = 20,000, leaving 180,000
  2. Cash discount applies to the reduced figure: 2% of 180,000 = 3,600
  3. 180,000 - 3,600

The mistake to avoid

Trade discount is deducted BEFORE cash discount, and cash discount is calculated on the reduced amount. Applying both to the original figure gives the wrong answer.

In the exam

If asked to distinguish two documents, state the purpose of each and who sends it to whom. Both halves are needed for full marks.