The Difference Between Official Receipts and Cash Invoice
Receipts and cash invoices are important for filing taxes and keeping precise accounting records in a business. Although both documents signify an exchange of money for a product or service, whether payment was made immediately or on credit determines whether the seller will provide an official receipt or a cash invoice. Receipts represent an exchange of cash at the time of purchase, and invoices represent a purchase on credit.
Receipts and invoices typically contain the same information, but invoices contain some additional details. Both contain a description of the product or service, name of the vendor, date of purchase and the amount of the transaction, including tax. Invoices typically also contain the payment terms, order number and shipping information.
Businesses use one of two accounting methods to record transactions -- cash accounting and accrual accounting. Both accounting methods allow businesses to accept receipts, but only accrual-based businesses can record invoices. Accrual-based businesses record transactions at the time of the transaction and include an accounts payable and accounts receivable account in the general ledger. Cash-based businesses record transactions as the cash exchanges hands and do not record receivables or payables. Therefore, cash-based businesses cannot accept or issue invoices.
When a business receives a receipt, the buyer pays for the purchase at the time of the transaction. The business purchasing the product or service records the transaction by debiting an asset or expense account and crediting the cash account. The business selling the product or service will debit the cash account and credit the sales account.
A cash invoice is a promise to pay and is a liability to the buyer and an asset to the seller. The buyer, or the person receiving the cash invoice, records the transaction by debiting an asset or expense account and crediting the accounts payable account. Once the buyer pays the liability, the buyer credits the cash account and debits the accounts payable account. The seller, or the business giving out the invoice, records the transaction by debiting the accounts receivable account and crediting the sales account. Once the seller receives payment for the cash invoice, the seller debits the cash account and credits the accounts receivable account.