Invoice Vs Receipt: What’s the Difference?

Friday, 14 May 2021

Accounting and bookkeeping are usually considered the domains of professionals. However, entrepreneurs too need to understand the basics of the subject to comprehend their financial data and make sound business decisions.

Among the fundamentals that need to be recognised, the most significant one is that the business must record all the transactions. Therefore, it is essential to have accurate financial documents and updated books without any missed payments or receipts.

However, when it comes to invoices and receipts, most entrepreneurs get confused between the two. Bookkeepers in Melbourne are aware of this fact and help them keep the two non-negotiable business tools separated. Here is how you can spot the difference if you are trying to learn the tricks of the trade.

Understanding an Invoice

An invoice is generated by the seller to get paid for the goods and services delivered to the customer. It is either delivered online or physically in Melbourne before the payment is received from the client.

The invoice has details of the goods or services provided to the buyer, the total cost and quantity of the items, and the methods of payment that are acceptable to the seller.

Other significant details include the name and address of both the parties involved in the transaction, date of issuing the invoice, invoice number, and due date for payment. The bookkeeper adds these details to ensure that the buyer knows what he is paying for, and the transaction gets recorded with all the required information.

The sellers need invoices to track transactions, keep a check on the delivery of goods and the management of stock. One vital thing to remember is that invoice cannot be considered proof of purchase. It is only the demand or request for payment made by the seller.

Comprehending a Receipt

Conversely, a receipt is proof of purchase and is generated by the seller to acknowledge that the customer has paid for the goods and services received. It indicates that the transaction has been completed, and the business in Melbourne has been compensated for its services.

The document includes the details of the items or the services provided by the seller, price of the items, taxes, discounts, total amount received from the customer, the method of payment utilised, receipt number, and signature of the seller.

Customers or buyers use receipts to prove that they have paid for the goods and services received from the seller. They are helpful for the customer as he/she can leverage them if they want to return the goods purchased due to some defect or if the quantity received is less than what has been written in the document.

A valid receipt is the bare minimum requirement when asking for a refund or exchanging a defective product in Melbourne. The receipt usually includes the return policy and the due date for making a return or exchange. It helps in improving relationship with customers and enhancing their trust in the business.

Similarities That Cause the Mix-Up

Many entrepreneurs in Melbourne are unable to differentiate between the two documents because of the common information on them. Both have the details of the seller and the buyer, the goods/services involved in the transaction, and the cost of the goods/services, which can make the business owner confused.

The digitisation of these documents has helped in using automation for these tasks. However, they are not the same document and cannot be used interchangeably. 

The bookkeeper makes sure that these are separated for tax purposes and claiming deductions. Thus, here are a set of key distinctions that will help you differentiate between the commercial documents used for recording transactions and are non-negotiable. 

Differences Between Invoice and Receipt

There are a few differences that help in segregating the two documents. Here is how you can spot the difference.

Time of Issuance

A clear sign of distinction between the two is the time of payment. An invoice is generated before the payment is made by the customer since it is a request for payment. On the other hand, the receipt is generated after the payment is received as an acknowledgment from the seller.

Evidence of Payment

As stated above, the invoice is not proof of purchase. It is a legally binding document, which informs the buyer in Melbourne about the price of the goods or services purchased from the seller so that he/she can make the payment by the due date.

In contrast, the receipt generated by the bookkeeper confirms the collection of the payment by the seller and thus, acts as proof of ownership.

Document Details

The invoice has more focus on the details of the goods and services, their quantity and pricing, while the receipt is focussed on the amount received and mode of payment used by the customer for the transaction. Also, the invoice is more detailed in comparison to the receipt.

Usage of the Document

Invoices are prepared by the bookkeeper to keep track of all the transactions taking place in the company. Receipts are used by the buyers to prove their expenses, which can be used to claim tax deductions or get reimbursed by their employers in Melbourne.

Why Bookkeepers Need Invoices and Receipts

Invoices are needed by bookkeepers to keep a check on the income and the revenue generated by the business. The information is needed for regular financial reporting, filing taxes in Melbourne and audits.

The document also informs them about the items that have been consumed from the inventory and need restocking. Receipts are needed by bookkeepers for making internal accounting smooth and easy.

These include receipt of a business lunch in Melbourne that needs to be reimbursed to the manager who paid for it. Thus, receipts help in handling the expenses of the employees.


Invoices and receipts are utilised by bookkeepers in Melbourne to make sure that all the records are updated, claim business deductions, and stay away from lawsuits with the help of the proof of purchase.

However, understanding the difference between the two is essential to make the proper use of the documents. Thus, keep the points mentioned above in mind while going through the paperwork. 


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