1. Why is documentation important in business? When consumers purchase goods with cash, the only documentation involved
is a receipt. However, when businesses like Outdoor World buy and sell goods, they usually purchase using trade credit. This means that the goods are purchased and delivered now, but no cash is paid until weeks later. Since businesses can make many credit transactions in a single week, it is very important that they keep track of: • what has been purchased
• for how much money • when payment is due • when payment has actually been made
This information is also essential for keeping accurate fi nancial accounts for the business.
The different elements of a regular business transaction Buyer
The business wishing to buy the goods starts by making an enquiry.
If the price is right, the buyer places an order on credit.
