How to Differentiate Invoice and Receipt?
For most people who are not familiar with documents used in business transactions, invoice and receipt seem to be the same document as they do not know the meaning and differences between them. However, in the eyes of the bookkeepers from a bookkeeping firm in Singapore, both serve different purposes when they are recording transactions (Also see Vital Elements in Bookkeeping) that a company has carried out. Now, let us have a closer look at invoices and receipts.
An invoice is a document that authorizes the sale. In contrast, a receipt is an official acknowledgement which shows that the consumer has received the goods or services. However, they do share some similarities. The invoices and receipts are legally non-negotiable instruments and are commercial documents. Also, they make up a part of the procurement cycle (Also see What is an Accounting Cycle?). One can find the particulars about the seller and the buyer on both invoice and receipt too.
Among the difference between an invoice and a receipt, the most significant one would be the time of issue. The seller will issue an invoice to the buyer before he receives the payments, while the issuance of receipt will only occur after the buyer has made the payment (Also see Accounting for Expenses). This means the seller will issue an invoice to the buyer to request payment. After the seller receives final payment from the buyer, he will issue the receipt.
One would use invoices to record the particulars of the goods that he has sold. Yet, he has not received the payments. Hence, we can see that the sellers would use invoices to tell the buyers about the amount that they need to pay (Also see The Importance of Accounts Payable Process). On the other hand, receipts are used as a piece of evidence that the buyer has made the payments for that purchase, and he has received the goods or services.
The details showed on an invoice include the unit price of goods purchased, their quantity, discounts, taxes, invoice number and the outstanding amount. The details presented on a receipt are mostly the same as those recorded on an invoice. The difference is that the receipt will show the receipt number rather than the invoice number. Moreover, instead of showing the outstanding amount, the receipt will present the amount that the buyer has paid as well as the mode of payment.