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.
Receipt vs Invoice
The difference between receipt and invoice is that receipt is proof of the payment made and invoice is the request to make a payment. The invoice is generated before receipt. It is sent from a seller to a buyer after the sale of goods and before the payment of goods. Whereas, Receipt is generated after the payment is done as proof that the payment has been successfully received by the seller.
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 namely 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, are 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 Between Receipt and Invoice
|Parameters of Comparison||Receipt||Invoice|
|Meaning||A commerical document acting as proof of payment||A legal document requesting payment.|
|Purpose||Serve as proof of amount paid by buyer for goods and services||Track sale of good and services|
|Period||Given after payment is made by buyer||Given after service is done and before payment is made|
|Details||lists the product quantity, amount of service, amount due etc.||lists the payment due on goods and services.|
|Further Clarifications||Divided into Revenue and Capital Receipt||Pro-forma, Interim, Final Invoice etc|
What is Receipt?
As the word suggests, a receipt is an incoming flow of cash or payment. During it’s origin in Jericho in 7500BC, the word meant “act of receiving” in the language Latin. 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.
The Government with its “Jaago Ghrahak Jaago” or the “Wake up consumer, be aware” consumer awareness scheme promotes consumers to take receipts from the buyer on purchase on anything. The programme was started by the Department of Consumer Affairs, to create consumer awareness through advertisement 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 bill/memo for goods and services and returning goods which are proven to be defective or faulty.
Receipts also help in accounting procedures and keeping records of inflow and outflow of cash. They are proof of accounting activity done by the buyer and seller. They help in determining profits or losses and the net worth of the company. The world’s longest receipt was generated in New York City which was 57.5 feet long.
What is 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 namely Pro forma invoice, interim invoice and final invoice. 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 break down of the final invoice that is the bigger payment is broken down into smaller payments as the work progresses. Final invoice is exactly how it states. It is an official request made for the 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 payment has been received by the seller whereas invoice is a request made by seller to buyer to make the payment of the goods and services.
- Receipt is made for the purpose to serve as proof that the payment is made by buyer. On the other hand, invoice is made to track sale of goods.
- Receipt is made after payment and invoice is made before payment.
- Receipt lists the quantity and amount of service of goods and service. Whilst Invoice lists the amount due on goods and services.
- Receipt is further divided into Revenue and Capital Receipt. The invoice is further divided into 9 parts including Pro-forma, interim, final invoice etc.
Receipt and Invoice are two peas in a pod. Though completely different, they complement each other and go hand in hand with each other. Without an invoice, a buyer will not be aware of the payment he needs to make and without the receipt, buyer will not be sure if the seller has received and accepted the payment.
Though invoice is not the more important one amongst invoice and receipt, we must always consider them essential while buying something. Invoice enlightens us about how much we need to pay so that we don’t pay them in excess and have a debit balance. Receipt enlightens us about the inflow of money or money equivalent from the buyer. Hence both must be considered equally important.