What is an invoice used for?
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Q:

What is an invoice used for?

A:

Quick Answer

An invoice is a document sent by a business to a client denoting an obligation to pay for goods or services. One primary purpose is to communicate the requirement to pay for the goods. The other is to document the transaction as an accounts receivable in its accounting system until the bill is paid.

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Full Answer

An invoice is different from a receipt. A receipt is an acknowledgement of amounts paid for certain goods and services. Business-to-business providers often let customers make inventory and supply purchases on an account. If the buyer needs items but does not have the cash to pay, he might say, "Bill me later," or "Send me the invoice."

Many companies have electronic accounting systems. When an invoice is prepared, the inventory sold is pulled from the current amount showing in inventory. The invoiced amount is recorded as accounts receivable. While some companies treat an invoiced amount as revenue, it is possible a client may not pay the bill. With an invoice, the company has proof when it records a "bad debt," which removes the invoiced amount from revenue and reduces taxes.

The purchasing company needs the invoice to update its accounting records for accounts payable. This account recognizes the amount of goods purchased but not yet paid for; companies typically include the invoice when paying for goods to ensure proper recording of the payment.

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    How does a pro forma invoice work?

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    A pro forma invoice is not a true invoice because it's not issued following a monetary transaction, according to the Houston Chronicle. It does not have a specified format and instead only lists contents that are being imported so that U.S. Customs and Border Protection can complete an inspection.

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    How do you create an invoice?

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    To create an invoice, you need to include a professional header, contact information for the customer, details of the invoice and services performed. Invoices should be sent along with the work or at an agreed-upon date.

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    When should an invoice be issued?

    A:

    Any company that sells to non-consumers should issue an invoice to the buyer at the time an order is placed or a purchase transaction takes place. In some cases, companies send invoices at the start, middle or end of a month instead of at the time of each purchase.

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  • Q:

    Where can you find blank invoice templates?

    A:

    Google Drive offers a large selection of blank invoice templates for download, and Aynax.com offers an online form that generates an invoice. Templates are available for several different kinds of invoices, and all are available as Microsoft Word or Excel Documents for free download.

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