Question

Question 4 (This is review question 13-1 from page 425, which had been assigned as homework.) Describe the nature of the following documents and records and explain their use in the sales and collection cycle: bill of lading, sales invoice, credit memo, remittance advice, monthly statement to customers

Answer 1

Bill of lading is often transmitted alectronically, once goods have shipped, and automically generates the related sales invoice as well as the entry in the sales journal.
Sales Invoice is a document indicating the description and quantity of goods sold, the price, freight charges, insurance, terms, and other relevant data.
Credit memo is a document indicating a reduction in the amount due from a cutomer because of returned goods or an allowance.
Remittance advice is document mailed to the customer and typically returned to the seller with the cash payment.
Monthly statement to customers is a document sent by mail or electronically to each customer indicating the beginning balance of their accounts receivable, the amount and date of each sale, cash payment received, credit memos issued, and the ending balance due.