What is Invoice ? Meaning, Contents and Functions

Meaning of Invoice ↓

Invoice is a bill which indicates the amount that is to be paid by the buyer to the seller. There is no standard form or style of invoice and as such it can be designed as per the requirements of the seller. It can be prepared in three or more copies as required by the parties concerned. The invoice may be sent along with the goods or at a later date. When cash is paid at the counter of the shop then cash memo is issued by the seller to the buyer.

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Contents of Invoice ↓

The invoice contains following main items :-

1. The name and address of the seller.
2. The name and address of the buyer.
3. The description of goods i.e quantity, quality, weight, size, etc.
4. The value of goods, less discounts, if any.
5. The net amount payable by the buyer.
6. Terms and conditions of payment.
7. Country of origin (in case of export trade)
8. Mode of transport.
9. Freight charges.
10. Insurance premium.
11. Bill of Lading or Railway Receipt Number.
12. Signature of the seller.
13. Date on which the goods are despatched.
14. E. & O.E. (Errors and Omissions expected).
15. Any other details, if required.

Functions of Invoice ↓

The functions of Invoice are as follows :-

1. The buyer comes to know about the amount to be paid to the seller.
2. He can check the invoice price against the quotation/proforma invoice price. If any difference he can sort it out with the seller.
3. It helps the buyer to fix the price for resale.
4. The invoice helps the buyer to verify the actual goods received.
5. It helps to prepare debit note or credit note.
6. It can be used as an evidence in the court of law.
7. Invoice facilitates the seller in checking up the total volume of sales and in verifying the stock balance.
8. It enables the buyer to make entries in the books of account.
9. It enables the seller to make necessary entries in his sales book and customers ledger amount.
10. It helps the buyer to know the exact due date of payment to the seller.