This becomes especially important when customers go to return flawed or faulty items. Receipts are used as proof of purchase or ownership by customers. However, they also help in the delivery of goods, keeping track of the goods and services sold, estimate future revenues and even for customer service by offering discounts on early payments and extended period for payment. Invoices are first and foremost used to make a request for payments from customers. A receipt on the other hand acknowledges that a payment has been made. An invoice is used to keep track of goods or services sold.An invoice goes to the customer who has to make the payment while a receipt may go either to the customer or to a third party as proof of payment.If a customer receives an invoice but hasn’t made the payment yet, the customer enters the payment as a Credit under Accounts Payable and a Debit under either an expense account or an asset account.If a vendor issues an invoice and the payment hasn’t yet been made, the vendor will enter the payment as a Credit to Sales and a Debit under Accounts Receivable.The receipt on the other hand details how much has been paid and what the mode of payment is. The invoice lists the total amount that is due or has to be paid.An invoice is issued before the payment is made.While an invoice basically requests that a payment be made, a receipt is proof that a payment has been made.

In cases in which the complete payment is made at once, the invoice and the receipt both list the total amount.Both list vendor and customer information.Similarities between an invoice and receipt However, when the receipt states these things, a separate invoice becomes unnecessary. That’s why an invoice becomes important – to list out the item or service that was the subject of the transaction. The receipt does not always state what the payment has been made for and in what quantities. It lists various bits of information such as the vendor and customer names, price, taxes, discounts, mode of payment, date of payment, receipt number, vendor’s signature and total amount payable. It also acts as a proof of ownership in the case of transaction of goods. It is the customer’s proof that the payment has been made. What is a receipt?Ī receipt is basically an acknowledgement from the vendor to the customer stating that the payment has been received. A PO is basically a document issued by the customer to the vendor detailing the items or services desired, the quantities and the agreed prices.Īs an added bonus, here’s a more in-depth overview of invoicing for you to peruse at leisure. To avoid more confusion, it needs to be noted that an invoice is also not a purchase order.

It also lists out many pertinent details such as the names of the vendor and customer, the address, phone number, email address and fax number of the vendor, the services or goods transacted, the quantities, the prices, the date the invoice was issued, the invoice number and the total payment to be made. However, an invoice isn’t just about requesting for payment. In other words, the vendor can use the invoice issued for a particular good or service to legally ensure that the payment on that is made. The most important thing to note about the invoice is that it is a legally enforceable document.

It is issued by the person selling the goods and/or services or the vendor to the person buying these goods or services or the customer. What is an invoice?Īn invoice is a request or a bill for payment in a transaction. Let’s explore these differences in detail. However, the two are very different documents, with almost completely different purposes. There seem to be plenty of similarities between the two, which is why it is understandable that the two are often confused. Both come into play when a buyer and seller of goods and/or services are involved in a transaction that will involve an exchange of said goods and/or services for payment.īoth are used to record the amounts owed and paid for with regards to the stated goods and services. So know that both an invoice and a receipt are documents important for accounting. It’s a huge risk to not understand the differences and similarities. But that really should not be the case when, according to this Atradius study, 10% to 20% of late payments are due to incorrect information on an invoice. The rest of us remain completely oblivious to the differences and often refer to an invoice as a receipt and vice versa. Others realize this in a slightly more unpleasant way when they go to file their taxes. Some people find out this fact when they go about settling the accounts for their business.

Invoice receipt meaning