Difference Between Invoice, Bill, and Receipt

Invoice

Invoice is the commercial document send from suppliers to customers in order to ask for payment after receiving goods or services. It is the official document that proves that the supplier shows the exact amount and payment term to customer. If there is no problem, the customer must pay the amount base on term and condition on the invoice.

Invoice is mostly sent to customer after goods are delivered and service is completed. However, in some circumstances, suppliers issue invoices before providing goods or services. It is known as the advance purchase or customer deposit.

Purpose of Invoice

• It is a formal request for payment after completing service or providing goods
• Invoice must be issued before receiving payment
• Accountant use invoice as the proof for recording and process payment request

The invoice should include the following item:

• Customer name
• Supplier name
• Detail name of goods or service
• Price per unit and total price
• Credit term
• Method of payment

Accounting for Invoice send and receive

Invoice is not the document used as evidence to record revenue or liability. Supplier recorded revenue only after goods or services are delivered. Customer record liability only after receiving the goods or service.

However, in real life, most companies use invoices as proof to record revenue and liability. They mostly issue invoice after completing service or deliver goods, so it is not the problem. But if company issue invoice without goods/service, we cannot use it to record revenue and liability.

Supplier Entry

When goods and service are delivered to the customer, the company issue official invoice. The entry should be:

Account	Debit	Credit
Accounts Receivable	xxxx
Revenue		xxxx

Customer Entry

After receiving both goods and invoices, Accountants will perform three ways of matching. If they are correct, the entry should be:

Account	Debit	Credit
Material / Fixed Asset	xxxx
Accounts Payable		xxxx

Bill

Bill is a very general term used in business that also includes an invoice. It is the term which customer use to call the invoice from the supplier and it is ready to make payment.  Bill contains more than one invoice, it is the summary of the invoice from the supplier. Bill shows the amount that the customer owes to the supplier. Moreover, some company uses the word bill to represent suppliers’ invoices to avoid the confusion with their own invoices.

For example, the company receives an invoice from its supplier for the goods that already delivered. After checking, everything is correct, the accountant enters the invoice as the bill into the accounting system.

Receipt or Payment Receipt

Receipt is the document issued by the supplier to customer after receiving payment. It is the official documents to prove that the supplier already receives cash or cash equivalent.

It can be full payment or part of any invoice. The customer uses this document as evidence to show that payment of any invoice is already made.

Receipt should include the following items:

• Customer name
• Invoice number
• Amount receives
• Method of payment
• Responsible person

Accounting record for receipt payment

Supplier Entry

After receiving the payment from customer, supplier will record the following:

Account	Debit	Credit
Cash	xxxx
Accounts Receivable		xxxx

Customer Entry

After making payment to the supplier, customer will record the following:

Account	Debit	Credit
Accounts Payable	xxxx
Cash		xxxx