Why You Should Never Throw Away Your Receipts

The following are 5 important documents that a farmer should file for record keeping;

• Cash receipt

A cash receipt is issued when sales are made in cash. In that case, the seller will generate a cash receipt which is printed in duplicate. The original cash receipt is given to the buyer, while the duplicate remains in the book of the seller. Later on, the seller will summarize the duplicates and enter them in his Cash Book. However, it is not likely for a small scale farmer to issue a cash receipt when selling items. Instead, you should note your sales at the end of the day in your petty cash book or directly in the Cash Book. If you are the one buying items and you receive a cash receipt, you should remember to record the details on your cash book and file the receipt as evidence of transaction.

• Invoice

Whenever items are sold on credit, an invoice is generated/written out of an invoice book which is usually in triplicate. The original invoice is given to the buyer together with the merchandise. Where monthly statements are sent to the buyer, the duplicates will be sent to the buyer together with the statement. The triplicate remains in the files of the seller as a record. Farmers should ensure that they record and file the invoices. The invoice records will be used to generate customer statements, which are essential in knowing how much a customer owes you.

• Statement

At the end of each month the seller should summarize all invoices to a customer in a statement. The statement is then sent to the customer for payment. The date of the statement is the last day of the month in question. The statement gives the dates of the invoices, invoice numbers, sales details and the amounts which are due, under the heading DEBIT. If during that month any payment is received from the customer, it will be accounted for under the heading CREDIT. The difference between debit and credit is entered under the heading BALANCE. This balance is the amount due for payment.

• Purchase order

Purchase order is a written request to a trading business to supply specified merchandise on credit. It warrants payment when the merchandise (accompanied by an invoice) is delivered. A farmer will normally not make use of this purchase order, but in government departments, in companies and in large organizations it is an indispensable means of controlling expenditures. It is commonly called a ‘local purchase order’ or LPO. A purchase order specifies the merchandise details such as the amount required, kind, size, make, color, etc. It needs the signature of the person who actually orders and that of the person who must approve the purchase.

• Cheque

A cheque is an order to the bank to make a payment. A cheque is the safest and easiest way of paying a debt or a purchase for a person with a bank account. Payments can be made by cheque provided that there is sufficient money in the account. The person who writes the cheque is the drawer. The drawer writes on the cheque the date, the name of the payee (the person who is to receive the money) the amount of money in letters and in figures and then the cheque must be signed by the drawer. The key details of the cheque should be copied on the stub (which bears the same number) and later be entered in the account books: name of payee, what you paid for and the amount paid.

A cheque can be ‘open’ or ‘crossed’. A crossed cheque is a cheque on which two parallel lines are drawn, up and down. A crossed cheque cannot be cashed and must be paid into a bank account. This is a matter of precaution, it prevents abuse.

An open cheque can be cashed at the bank. A cheque can be ‘endorsed’, which means that the payee signs his name on the back of the cheque and gives it to somebody else by way of payment. An endorsement can be forged. To make endorsement impossible the words ‘not negotiable’, ‘account payee only’ or ‘& Co’ are added to a crossed cheque.

To draw from one’s own account, ‘self’ or ‘cash’ is written on the line intended for the payee’s name.

To put money into one’s own account (whether cash or cheque) one has to fill in a pay in slip, in duplicate, which the bank provides. Cheque and pay in slip are handed over to the cashier, who checks the slip and hands one copy back after having stamped it. It serves as a receipt.