What is an Invoice or a Bill?

Invoice or Bill

An invoice is a document created by the seller as evidence of a sales transaction between a buyer and the seller. It is often prepared in case of a credit sale. Nowadays invoices are prepared with the help of ERPs i.e. in a digital format yet they can also be prepared on paper.

It is a non-negotiable commercial document and normally contains details such as;

• Date of transaction
• Unique Identification Number
• Details of Buyer
• Quantity Sold
• Price Per Item
• Short Description of Items Sold
• Amount
• Taxes
• Terms of Payment
• Signature of the Authorized Party

The terms are synonymous with each other, nevertheless, it is commonly accepted that an invoice is created whereas a bill is received. It may look similar to a cash memo, however, a cash memo is only used for cash sales.

Template of Invoice or Bill

The original copy is provided to the buyer whereas the duplicate is preserved by the seller as evidence of the transaction. A bill acts as a source document at the time of preparing journal entries. 

Short Quiz for Self-Evaluation

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