Question

please help me with number 1.1 and 1.2

QUESTION 1 28 marks Precious Beauty Products (Pty) Ltd buys inventory (cosmetic products) and then sells the products to various chain stores at a profit. PART A: FUNCTIONS AND ACTIVITIES There are various functions and activities within each function of the accounting system for the various cycles. REQUIRED Marks 1.1 List the seven main functions in the accounting system for credit sales and receipt transactions with a brief description of each function. (15) 1.2 (13) List the five functions in the accounting system for credit purchase and payment cycle with a brief description of each function.

Answer 1

Answer to question 1.1
Functions for credit sales in the accounting system:
1) key competitive tool:-
The use of credit sales is a key competitive tool in some industries, where longer payment terms can be used.

2) customer attraction:-
A reasonable payment delay allows customers to make additional purchases which in turn helps in attracting additional customers.

3) fulfillment of urgent needs:-
Good credit worthiness helps one to meet urgent business needs in times of financial crisis.

4) profit increment:-
Higher prices are charged on credit sales which helps the sellers to increase their profits.

5) increase in turnover rate:-
Credit sales increases the seller's turnover rate and also helps in reducing the problem of holding goods for a long period of time.

6) increase in sales:-
Credit sale encourages bulk purchase on the part of the buyer. Thus, there is an increase of sales when seller gives room for credit facility.

7) increase in purchasing power:-
credit sales helps to increase the purchasing power of the buyers.

Functions of receipt transactions in accounting system:-
1) providing information:-
Receipt transaction provides information to customers or donors. It serves as an effective communication tool.

2) internal accounting:-
Receipt transactions helps in assisting internal accounting of an organisation. A receipt also notes any discounts on sales or allowances, which are used for accounting and financial reporting.

3) documenting purchase:-
Receipt transactions are very useful in documenting purchase.

4) non profit donations:-
Individuals or businesses wanting to claim cash or gift contributions to a nonprofit organization normally need a receipt.

5) documentation of charitable contributions:-
Receipt provide documentation of the contribution during an audit.

6) returns and exchanges:-
Companies that offer returns and exchanges policies often require a receipt as part of the process.The receipt also conveys important information about the return policy, such as how many days from the date of purchase a customer has to return items.

7) follow up survey:-
Receipts communicate company policies and offer discounts for follow-up surveys.