The receipt and invoice play the crucial role of representing proof of financial transactions. They are essential accounting documents used to keep records of business transactions.
These documents provide information about the amount owed and paid in return for goods and services.
Key Takeaways
- Receipts are given after a payment, while Invoices are given before a payment is made.
- Receipts act as proof of payment, while Invoices act as a request for payment.
- Receipts include the date, amount, and description of the transaction, while Invoices include additional details such as the due date, terms, and itemized breakdown of charges.
Receipt vs Invoice
Receipts are important for both the buyer and the seller as they provide a record of the transaction and can be used for tax purposes, accounting, and as proof of payment in case of disputes or returns. An invoice is a document that is issued by a seller to a buyer requesting payment for goods or services.
Receipt can be considered a legal record or a piece of documentary evidence for purchased or sold goods. They are also pieces of evidence in services like legal consultation and medical prescription.
Based on accounting, there are two types of receipts: Revenue Receipt and Capital Receipt. They are further divided into tax and non-tax, savings, and loans, respectively.
An invoice can also be considered as a proof or legal record that states the identity of the buyer and the seller, as well as the quantity and price of the goods and services.
Invoices first began in 5000 BC in Mesopotamia, where details of transactions were carved on stones and leaves. Later, animal skin and parchment became popular, and they used seals as signatures.
Comparison Table
| Parameters of Comparison | Receipt | Invoice |
|---|---|---|
| Meaning | A commercial document acting as proof of payment | A legal document requesting payment. |
| Purpose | Serve as proof of the amount paid by the buyer for goods and services | Track the sale of goods and services |
| Period | Given after payment is made by the buyer | Given after service is done and before payment is made |
| Details | lists the product quantity, amount of service, the amount due, etc. | lists the payment due on goods and services. |
| Further Clarifications | Divided into Revenue and Capital Receipts | Pro-forma, Interim, Final Invoice, etc |
What is a Receipt?
As the word suggests, a receipt is an incoming flow of cash or payment. During it’s origin in Jericho in 7500 BC, the word meant “act of receiving” in the Latin language.
In this procedure, a receipt is proof of payment received from the buyer to the seller for the goods and services. The receipt is an essential need for the consumer as well.
With its “Jaago Ghrahak Jaago” or the “Wake up consumer, be aware” consumer awareness scheme, the government encourages consumers to take receipts from the buyer on purchase on anything.
The program was started by the Department of Consumer Affairs to create consumer awareness through advertisements and slogans. It was enacted to spread awareness that receipt acts as evidence of the payment made by the buyer.
The government also launched the new Consumer Protection Act, 2019, and widened the definition of Unfair Trade Practices as compared to the 1986 Act.
The act newly introduced the practice of issuing bills/memos for goods and services and returning goods that are proven to be defective or faulty.
Receipts also help in accounting procedures and keeping records of the inflow and outflow of cash. They are proof of accounting activity done by the buyer and seller.
They help determine profits or losses and the company’s net worth. The world’s longest receipt was generated in New York City, which was 57.5 feet long.
What is an Invoice?
A commercial document delivered by a seller to a buyer about a sale transaction and stating the items, quantities, and agreed pricing for products or services the seller has provided the customer is known as an invoice, bill, or Tab Invoices.
It was first published in the double-entry book system by Italian Luca Pacioli.
Invoices can be used to bill for one-time tasks or recurring work, although they are most commonly used to seek payment when work is finished and if the customer is usual and repetitive.
In the past, invoices were printed on paper, either handwritten or typed, and then mailed.
There are three major types of invoices: Pro forma, interim, and final. A Pro forma invoice, as the name suggests, is a “pre” invoice that doesn’t demand payment but informs the customer how much will the estimated amount be after the work is complete and the goods are delivered.
The interim invoice is a breakdown of the final invoice, that is, the bigger payment is broken down into smaller payments as the work progresses.
The final invoice is exactly how it states. It is an official request made for payment after the work is done. This is the standard procedure in most firms.
Invoices can be used to bill for one-time tasks or recurring work, although they are most commonly used to seek payment when work is finished and if the customer is usual and repetitive.
Invoices have their own set of benefits and drawbacks.
Though invoices are a chance to deliver a good message about your brand and its products, customer satisfaction can also be improved through efficient invoice creation and payment collection.
Without this, a badly managed system might harm the company’s reputation.
Main Differences Between Receipt and Invoice
- A receipt is a document verifying that the seller has received the payment, whereas an invoice is a request made by a seller to the buyer to pay for the goods and services.
- A receipt is made for the purpose of serving as proof that the payment is made by the buyer. On the other hand, an invoice is made to track the sale of goods.
- A receipt is made after payment, and an invoice is made before payment.
- A Receipt lists the quantity and amount of service of goods and services. While the Invoice lists the amount due on goods and services.
- A receipt is further divided into Revenue and Capital Receipts. The invoice is further divided into 9 parts, including Pro-forma, interim, final invoice, etc.
- https://link.springer.com/chapter/10.1007/978-3-030-20890-5_35
- https://digitalcommons.salve.edu/cgi/viewcontent.cgi?article=1234&context=goelet-personal-expenses
Last Updated : 13 July, 2023
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
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