Invoice

An overview of the concept and structure of invoices in business transactions

Invoice

An invoice is a commercial document issued by a seller to a buyer, relating to a sale transaction and indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates that payment is due from the buyer to the seller, according to the payment terms.

UML class diagram of an invoice

Components of an Invoice

An invoice typically includes the following components:

• Header: This section includes the word "Invoice" and the invoice number, which is a unique identifier for the transaction.
• Seller's Information: The name, address, and contact details of the seller.
• Buyer's Information: The name, address, and contact details of the buyer.
• Invoice Date: The date when the invoice is issued.
• Due Date: The date by which payment is expected.
• Description of Goods or Services: A detailed list of the items sold or services provided, including quantities and unit prices.
• Total Amount Due: The total amount payable, including any taxes and discounts.
• Payment Terms: Conditions under which the seller will complete the sale, including the payment method and any penalties for late payment.

Types of Invoices

Invoices can vary depending on the nature of the transaction and the industry. Common types include:

• Proforma Invoice: A preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods.
• Commercial Invoice: Used in international trade, detailing the goods being shipped and their value for customs.
• Credit Invoice: Issued when a refund is due to the buyer.
• Debit Invoice: Issued when additional charges are due from the buyer.

Invoice Processing

The process of handling invoices involves several steps:

1. Receipt: The buyer receives the invoice from the seller. 2. Verification: The buyer verifies the invoice details against the purchase order and delivery receipt. 3. Approval: The invoice is approved for payment by the relevant department. 4. Payment: The buyer makes the payment according to the terms specified. 5. Recording: The transaction is recorded in the buyer's accounting system.

Related Concepts

• Purchase order
• Receipt
• Accounts payable
• Accounts receivable

Related pages

• Accounting
• Business transaction
• Financial statement