Question

How does a business know when to create an invoice and when to create a sales receipt? What are the key differences between an invoice and a sales receipt? What industries would likely use invoices over sales receipts and vice versa?

Answer 1

Answer)

The business create an invoice when they sell goods on credit and create sales receipts when they sell goods for cash or receive cash on credit sales to the customer.

The key differences between Invoice and a sales receipts are:

A Invoice is requests for payments whereas Sales receipts acts as proof for payments.

If invoices are issued then the revenue is expected to be realise in future and hence they are recorded as debtors. When receipts are issued it represents that cash is received and hence either sales are recorded as cash sales or debtors balance is reduced.

In general, Wholesale industries who sell bulk quantity of goods to resale or futhur processing are likely to issue invoices and retailers who sell goods to final customers are likely to issue receipts.