During a sale of goods or services, a buyer and a seller enter into an agreement to transact business and complete a financial transaction. The agreement can be verbal or written, and the terms of the transaction will be recorded or documented with an invoice and a receipt. Invoices and receipts are source documents for accounting; an invoice is also called a bill. Invoices and receipts are used in accounting to record sales transactions and to account for requests and receipts for payment.
An invoice is a bill, or a request for payment, for a sale. It lists goods or services provided by the seller to the customer, along with prices, credits, discounts, taxes and total due. It may also include credit information, an invoice number, a salesperson’s name and any special sales programs. For example, many invoices allow the buyer 30 days to pay and offer a discount for paying within the first 10 days of the invoice date. An invoice includes business contact information for the seller, including business name, address, phone number, fax number and web address. It also includes contact information for the buyer and the date of the sales transaction. Invoices should not be confused with purchase orders, which are written requests from buyers to sellers authorizing the shipment or delivery of goods with agreement to pay.
A receipt is documentation that payment has been made to finalize a sale. It serves as proof of ownership in most cases. It lists goods or services, prices, credits, discount, taxes, total amount paid and method of payment. Receipts generally include information about buyers and sellers, in different formats and to varying degrees. For example, point of sale purchases, such as buying gas for a car at a gas station, have complete seller’s contact information but limited buyer’s information. A receipt is the buyer’s proof of payment.
Issuers and Recipients
Invoices and receipts are generated by sellers, merchants and vendors and issued to buyers, customers or clients. Accounting departments, sales staff and customer service staff may issue invoices to customers. Doctors’ and dentists’ offices issue invoices to patients for services rendered. A waiter or waitress issues an invoice, called a bill or a check, to diners in restaurants for the food they order. Recipients of receipts are normally customers but may be accountants or bookkeepers, as well as third parties receiving receipts as proof of customer payment for financial proceedings.
Invoices are used to request payment from buyers, keep track of sales, help control inventory and facilitate delivery of goods and services. Invoices are also used to track expected future revenues and to manage customer relationships by offering favorable payment options, such as extended time periods for payment or discounts for early payment or cash payment. Receipts are used by buyers or customers to prove they paid for an item, especially in return situations in which goods are faulty or defective.
- BusinessDictionary.com; Invoice; 2011
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