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Revise Business documents for Accounting 7707 (O Level) — revision notes, 38 practice questions and instant AI marking.

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Cambridge O Level Accounting 7707

Business Documents

The big idea: Every entry in the books starts with a piece of paper (or its electronic version). Documents prove that a transaction happened and give the figures that are entered in the books of prime entry.

Summary — What This Chapter Covers

Recognise the invoice, debit note, credit note, statement of account, cheque and receipt: who sends each one and why.
Complete pro-forma documents, including trade discount on an invoice and a statement of account.
Use documents as sources of information: invoice, credit note, cheque counterfoil, paying-in slip, receipt and bank statement.

1. The Main Business Documents

Syllabus 2.2 · Paper 1 & 2

Who sends what, and why

Document	Sent by → to	Purpose
Invoice	Seller → buyer	Bills the buyer for goods sold on credit: quantities, prices, trade discount, amount due and payment terms
Debit note	Buyer → seller	Asks the seller for a credit note, e.g. when goods are returned or overcharged
Credit note	Seller → buyer	Reduces the amount the buyer owes, e.g. for goods returned or an overcharge
Statement of account	Seller → buyer (usually monthly)	Summarises the month: opening balance, invoices, credit notes, payments received, and the balance now owed
Cheque	Buyer (drawer) → payee	Instructs the drawer’s bank to pay the stated sum to the payee
Receipt	Person receiving money → payer	Proves that payment has been made

Debit note or credit note?

The buyer writes a debit note; the seller answers with a credit note. Only the credit note is a source document for the books.

Practice Question 1

Name the document: (a) sent by a supplier at the end of the month showing the amount owed; (b) sent by a seller to reduce the amount a customer owes because goods were faulty; (c) given to a customer who has paid cash; (d) sent by a seller listing goods supplied on credit.

2. Completing Pro-forma Documents

Syllabus 2.2 · Paper 1 & 2

Invoices, credit notes and statements

On an invoice, multiply quantity by unit price for each line, add the lines, then deduct trade discount (a reduction from the list price for trade customers). The net figure is what is recorded in the books; trade discount itself is never recorded in any account.

Worked example: invoice

Bright Homes sold to Nour Interiors on credit on 4 June 2025: 20 desk lamps LX2 at $45 each and 12 shelf units S40 at $30 each, less 20% trade discount. Complete invoice 2187.

Invoice 2187 · Bright Homes → Nour Interiors · 4 June 2025
Quantity	Description	Unit price $	Total $
20	Desk lamp LX2	45	900
12	Shelf unit S40	30	360
		Gross total	1,260
		Less trade discount 20%	252
		Amount due	1,008

Worked example: credit note and statement of account

On 11 June Nour returned 2 faulty lamps (credit note CN44: 2 × $45 = $90, less 20% = $72). On 18 June Nour paid the opening balance of $350. Prepare Bright Homes’ statement of account for June.

Statement of account · Nour Interiors · June 2025
Date	Details	Debit $	Credit $	Balance $
Jun 1	Balance			350
Jun 4	Invoice 2187	1,008		1,358
Jun 11	Credit note CN44		72	1,286
Jun 18	Bank — thank you		350	936

The amount owed at the end of June is $936. A statement of account uses a running-balance layout because it is a document, not a ledger account.

Practice Question 2

Complete the totals on this invoice: 15 items at $16 each and 8 items at $25 each, less trade discount of 15%.

Memorise

Invoice

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Each document feeds a book of prime entry

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