What is an invoice?
An invoice is a commercial document that shows the details of a transaction (supply of goods or services) between a buyer and a seller and establishes the buyer’s obligation to pay. It includes the information about the parties of the transaction, description of the goods purchased or the services rendered, their prices, including applied tax rates, and other information that helps understand the nature of the transaction. Usually, the seller is responsible for issuing and sending the invoice to the buyer.
An issued invoice establishes the buyer's obligation to pay for the goods or services supplied according to the terms specified in the contract. Hence, it should be sent to the buyer either after or at the same time as the goods or services have been supplied.
Invoices serve several different functions at once:
- Commercial: details the conditions of the transaction.
- Accounting: acts as an accounting document.
- Fiscal: keeps a record of taxes applied.
- Legal: serves as legal proof of the sale and establishes the buyer's obligation to pay.
From a company's perspective, a sales invoice is an invoice that is issued for goods or services sold. Conversely, a purchase invoice is an invoice that a company receives for goods or services bought.