In the world of business, receipts are considered to be one of the most important documents. According to Investopedia, “a receipt is a written acknowledgement that something that holds value has been transferred from one party to another.” One of the most common forms receipts that is widely used in business transactions is the acknowledgement receipts.
Since business transaction can be really broad, different forms of receipts are issued in different business dealings. Let us take for example, when you want to deposit money to your bank account, the bank teller will issue you a deposit receipt to acknowledge that you have completed a transaction with the bank.
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How Is an Invoice Different from a Receipt?
When purchasing goods and/or service, the seller and the buyer usually complete a financial transaction during business transaction. This agreement is commonly recorded via invoice or receipt. And while these two transaction documents are essential for accounting, there are some people who are not quite familiar with the difference between an invoice and a receipt and even use the two terms interchangeably.
In this section, we would learn how a receipt is different from an invoice. And since we have already discussed the definition of a receipt, let us get to know what an invoice is all about. An invoice is a document that is issued by the seller to the buyer to authorize a sale. It usually contains information (price, discount, date, and place of the delivery) of the goods and/or service purchased, as well as the names and address of both parties. Here are the other factors that set them apart from each other:
- The seller writes an invoice to request payment from the buyer but sends a receipt to confirm that the buyer has completed a financial transaction with the seller.
- An invoice is usually issued to the buyer prior to the payment of the goods and/or services, while receipts are usually issued after the buyer has made payment of the goods and/or services.
- An invoice is commonly used to keep track of the goods and/or services that are sold to the buyer, while a receipt is a form of acknowledgement that the buyer has settled the payment.
If you’re looking for a receipt to use for your business, check out the receipt templates in PDF on our website.
Primary Uses of a Receipt
It isn’t a secret that receipts are the core of retail. Whenever you purchase something from the store, the retailer always offer you a copy of the receipt. Although there are some buyers who just throw away their receipt in the trash bin, but have you ever wondered about the other main uses of a receipt?
- A receipt is an effective communication tool because it provides customer essential information of the sale transaction. Aside from the details of the goods and/or services purchased by the customer, it also contains other information, such as the subtotal and the taxes.
- It is highly essential for internal accounting because it accurately keep track of the day-to-day sales and revenue of a business. This valuable sales document are submitted to the Internal Revenue Service to audit the company’s tax return.
- The sales management will often ask you to submit your receipt as proof of your purchase before you will be able to return or exchange a good.
Our website also offers a collection of different delivery receipts. They can be downloaded for free and are highly editable.
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Tax Time: The Art of Organizing Your Receipts
Non-business people are often too quick to say no whenever they are asked if they want a copy of the receipt for their purchased item. However, this is not the case for business people because receipts are highly valuable documents, especially when filing for a tax return. And since you may have hundreds, if not thousands of customers purchasing goods and/or services from your business establishment, keeping and organizing all the receipts can be a bit of headache. So, in this section, we will discuss the some basic yet effective steps on organizing your receipts.
- Designate a specific place where you can keep all your receipts. Make sure to organize them by date and business purpose.
- If you’re aiming for a paperless office, you can choose to scan the receipts and store them electronically.
- Another option is to take a photo with your mobile device.
- Use a daily journal to keep track of your daily business receipts.
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How Long You Should Keep Your Receipts
Sometimes, seeing stacks of receipts in your offices or file cabinets can be painful to look at. Yes, we all know how important they are, but how long should you keep them?
Since receipts are essential documents used in tax returns, experts recommend keeping them for three years. But in some instance, the IRS performs an audit up 6 years, especially if they suspect a serious mistakes on the taxes filed. To save you from headache, just keep them for 6 years if you do not want to jeopardize your tax return. Feel free to download our receipt templates on our website, too.
Writing a Receipt
Since receipt is commonly used to keep track of your business profit and revenue and for filing of tax return, it is extremely important to write down accurate information on a receipt.
- Aside from listing down your business and customer information and date of purchase, write and describe the item purchased by the customer.
- Make sure to jut down the original price of the item and if possible, the discount, tax rate, and tax.
- Include any add-on cost, the total amount, and type of payment.
Make sure to also check out our car sales receipts and download them for free at our website.
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Types of Receipts
- Receipt of payment – This type of receipt includes receipt number, check number, money order number.
- Medical receipt – It is commonly used to acknowledge payment for medical items. Information reflected on this receipt are diagnose code, time and date of visit, consultation, and total amount.
- Sales receipts – A bill of sale commonly used as proof of purchase.
- Rent receipt – Issued by the landlord as proof that the tenant has completed a lease or rent payment. It includes the billing period.