PURCHASE INVOICE — MEANING, FEATURES AND IMPORTANCE

A purchase invoice is a business document that a customer or business receives when they buy something on credit.

It shows the amount a buyer owes to a supplier.

A purchase involved can also be defined as an accounting document that a customer receives from the seller seeking payment of a specific amount for goods delivered or services given to the customer.

The purchase invoice is the source document for the purchases day book/journal because credit purchases are recorded in the purchases day book.

What connection exists between the Purchase and Sales invoices?

The purchase invoice received by the buyer is originally the sales invoice sent by the seller.

As a result, the purchase invoice received by the buyer is a sales invoice to the seller, and the sales invoice provided by the seller is a purchase invoice to the buyer.

Simply put, a buyer sees an invoice as a purchase invoice and a seller views the same invoice as a sales invoice.

In other words, the seller uses the buyer's copy of the purchase invoice as a sales invoice, and the buyer uses the seller's copy of the sales invoice as a purchase invoice.

What information is contained in the purchase invoice?

1. The number of goods the customer bought.

2. A description of the goods purchased by the customer

3. Discounts received by the customer.

4. Total amount owed by the customer.

5. The seller's name and the company or shop address

6. The date when the purchase was made.

7. If applicable, information about the value-added tax charge (VAT).

8. The buyer's name

9. The payment due date 

10. Other terms of sales.

11. The seller's and buyer's signatures.

12. The purchase invoice number.

As opposed to sales invoices, a company's purchase invoice numbers will not be sequential because goods are bought from different suppliers.

Importance of the Purchases Invoice

1. Shows that goods have been purchased: Purchase invoices show that a buyer has purchased goods from a specific supplier.

The purchase invoice shall be consulted if there are ever any questions or concerns about the details or cost of the things that were purchased.

2. Used to enter credit purchases into the books of account: Credit purchases are entered into the books of accounts using the purchase invoice.

By adding up the balances on all of a company's purchase invoices, you can determine the total credit purchases made by that company.

We record credit purchases in the purchase day book/journal using the purchase invoice.

The total of the purchase invoice balances is used to calculate account payable, one of the entries made on the balance sheet.

3. Tax filing purpose: The purchase invoice is also important for tax filing reasons.

A firm can precisely record its expenses for tax authorities with the use of purchase invoices.

A purchasing organization must have a purchase invoice in case tax authorities contest the accuracy of the tax payment.

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