Question 1
(a) What is a proforma invoice?
For b and c, a sample of a proforma invoice was presented and the candidates were expected to answer the following questions;
(b) From the document, identify the following:
(i) seller’s name;
(ii) buyer’s name;
(iii) value of cash discount if amount paid within 20 days.
(c) Calculate the amount payable if the buyer pays
(i) after 20 days of purchase;
(ii) within 20 days of purchase.
(d) Explain the term 10%/20 Net 30 days on the proforma invoice.
Observation
Some of the candidates who attempted this question did not performed well. They could not differentiate between the seller and the buyer in the invoice. Also, they were not able to calculate the amount payable by the buyer if payment were made before and after the 20 days. That is to say that they could interpret 10%/20 Net 30 days.
The expected responses to the question include:
A proforma invoice is a document which serves as a quotation from the seller to the buyer asking for payment to be made before the goods will be supplied.
1bi. The seller is Nalipal Mechanical Stores
(ii) The buyer is Bilikis Hawa
(iii) Value of the cash discount = ₦114,000 x 10/100 = ₦11,400
1cAmount payable if the buyer pays :
i. After 20 days of purchase
₦120,000 x 5/100 = ₦6,000
₦120,000 – ₦6000 = ₦114,000
ii. Within 20 days of purchase
₦114,000 x 10/100 = ₦11,400
₦114,000 – ₦11,400 = ₦102, 600
This means that the buyer is entitled to 10% cash discount if he pays the invoice amount within 20 days. However, the entire invoice amount must be paid within 30 days.