Remittance
Definition
Remittance is the act of sending money, typically from one entity to another, to settle an invoice or make a payment. This ensures that the funds reach their intended destination, often involving a bank transfer or postal service.
Examples
- International Remittance: A person working in a foreign country sends a portion of their earnings back to their home country to support their family.
- Utility Bill Payment: A customer sends payment to a utility company using a remittance slip that was included in the bill.
- Business Payment: A business sends a supplier payment along with a remittance slip detailing the invoices being paid.
Frequently Asked Questions
Q1: What is a remittance slip? A: A remittance slip is a document that accompanies a payment to provide details about the transaction, such as the account number, invoice number, and payment amount.
Q2: How do remittances benefit businesses? A: Remittances help businesses keep track of payments, ensure accuracy in accounting, and maintain smooth cash flow operations.
Q3: Can remittance be done electronically? A: Yes, remittance can be done electronically through online banking or financial service apps, which are faster and more efficient compared to traditional methods.
Q4: Why is the remittance coupon book important? A: It is essential as it organizes and tracks all payment details systematically, ensuring accurate record-keeping and simplifying the payment process.
Related Terms
- Invoice: A document issued by a seller to a buyer, indicating quantities, descriptions, and agreed prices for products or services.
- Trade Discount: A reduction in the list price granted by a seller to a buyer, usually for prompt payment or bulk purchase.
- Electronic Funds Transfer (EFT): A system of transferring money from one bank account directly to another without any paper money changing hands, usually done via electronic systems.
Online References
Suggested Books for Further Studies
- “International Remittances and Migration: Exploring the Balance of Benefits” by Bijit Bora
- “Fundamentals of Corporate Finance” by Richard A. Brealey, Stewart C. Myers, and Alan J. Marcus
Fundamentals of Remittance: Accounting Basics Quiz
### What is a remittance in financial terms?
- [x] The act of sending money to settle a payment.
- [ ] The process of receiving money from a customer.
- [ ] The calculation of taxes owed by a business.
- [ ] The preparation of financial statements.
> **Explanation:** Remittance refers to the act of sending money, typically to settle an invoice or make a payment.
### What information is typically included on a remittance slip?
- [ ] Company mission statement.
- [x] Account number, invoice number, and payment amount.
- [ ] Employee payroll data.
- [ ] Tax identification number.
> **Explanation:** A remittance slip usually includes detailed information such as the account number, invoice number, and the payment amount.
### How is a remittance coupon different from a remittance slip?
- [ ] They are the same thing.
- [x] A remittance coupon is often preprinted with payment information.
- [ ] A remittance slip is used only for international transactions.
- [ ] A remittance coupon is an electronic document.
> **Explanation:** A remittance coupon is often preprinted with payment information like account numbers and due dates, while a remittance slip can be individually prepared.
### What is a common use case for international remittance?
- [x] Sending money to support family members in another country.
- [ ] Buying goods online.
- [ ] Making a charitable donation.
- [ ] Paying local utility bills.
> **Explanation:** International remittance often involves sending money to support family members residing in a different country.
### Which payment method is commonly associated with a faster remittance process?
- [x] Electronic Funds Transfer (EFT)
- [ ] Postal money order
- [ ] Cash payment
- [ ] Check payment
> **Explanation:** Electronic Funds Transfer (EFT) is widely implemented for faster and more efficient remittance processes.
### What is a trade discount?
- [ ] A reduction in utility bills.
- [x] A reduction in the list price granted by a seller to a buyer.
- [ ] Interest earned on savings.
- [ ] An extra fee charged by banks during remittance.
> **Explanation:** A trade discount is a reduction in the list price of goods or services, typically given by the seller to the buyer.
### Why is the remittance coupon book important?
- [ ] It details employee salaries.
- [ ] It helps calculate business taxes.
- [x] It organizes and tracks payment details.
- [ ] It serves as a legal contract.
> **Explanation:** A remittance coupon book organizes and tracks all payment details systematically, simplifying the payment process and ensuring accurate record-keeping.
### What type of business transaction usually does not involve remittance?
- [ ] Paying an external vendor.
- [x] Employee end-of-year bonus payment.
- [ ] Utility bill payment.
- [ ] Settlement of invoice.
> **Explanation:** Employee end-of-year bonus payments are typically recorded in payroll, not remittance transactions.
### Which entity often involves using a remittance slip?
- [ ] Product manufacturing units.
- [x] Utility companies for bill payments.
- [ ] Research institutions.
- [ ] Government tax departments.
> **Explanation:** Utility companies often include remittance slips in their bills, ensuring customers can properly detail their payments.
### What is the primary benefit of electronic remittance?
- [x] Speed and efficiency in processing payments.
- [ ] Higher accuracy in paper records.
- [ ] Better relationship with financial advisors.
- [ ] Reduced interest rates on loans.
> **Explanation:** Electronic remittance provides speed and efficiency in processing payments, making it a popular choice for both businesses and individuals.
Thank you for digging through the essentials of remittance, accompanied by a practical quiz to solidify your understanding. Continue expanding your financial proficiency!
