What is invoice, Accounting Basics

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Q. What is invoice?

An invoice is a document prepared by the seller of merchandise as well as sent to the buyer. The invoice contains the details of a sale such like the number of unit price, total price billed, terms of sale, units sold and manner of shipment. A retail company organize the invoice at the point of sale. A wholesale company which supplies goods to retailers organize the invoice after the shipping department notifies the accounting department that it has shipped the goods to the retailer. It is an instance of an invoice prepared by a wholesale company for goods sold to a retail company. By resources of the invoice as the source document a wholesale company records the revenue from the sale at the time of the sale for the following reasons

- The seller has passed legal title of the goods to the buyer as well as the goods are now the responsibility and property of the buyer.

- The seller has recognized the selling price of the goods.

- The seller has finished its compulsion.

- The seller has exchange the goods for another asset such as cash or accounts receivable.

- The seller are able to determine the costs incurred in selling the goods.


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