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All you need to know about cash invoices

Updated on :  

08 min read.

Small businesses often have a high number of cash transactions daily. Any transaction which involves the immediate outflow of cash towards the purchase of assets, goods, or services can be considered a cash transaction.

Meaning of cash invoice and when to raise it?

Cash invoices are particularly common among small business owners. Invoices are a record of a sale transaction that has taken place, and where the payment method is cash, a cash invoice is issued. When it comes to credit sales, a collection receipt will also be issued when payment is received. But for cash sales, the cash invoice is sufficient.

Format and Contents of Cash Invoice

The common contents of a cash invoice include-

  • Name and address of the business
  • Details of the customer
  • Invoice number
  • Date of issue of the invoice
  • Nature of payment (for any goods or services availed)
  • Amount paid
  • Signature of the authorised buyer makes the payment person
cash invoice

How to record cash invoices

  • The buyer receives a cash invoice from the businessperson for the sale of goods made to him.
  • On the receipt, the buyer records the transaction by crediting the accounts payable account and debiting the asset or expense account for the same. The payment is made by the buyer almost immediately, after which the buyer records the payment transaction by crediting the cash account and debiting the accounts payable account.
  • Correspondingly, when sending the invoice, the seller records the transaction by crediting the sales account and debiting the accounts receivable account.
  • When receiving the payment, the seller then proceeds to debit the cash account and credit the accounts receivable account.

Difference between cash invoices and receipts

  • Cash invoices are usually issued in transactions where the goods are received and the payment is made immediately. Receipts, on the other hand, are issued on the completion of the payment.
  • Invoices are usually a request from the seller to the buyer for the payment to be made. Receipts are proof of payment issued to the buyer.
  • Invoices help businesses track the sale of their goods and services. They serve as evidence of a transaction. Receipts help the buyer document the payment made for a particular set of goods or services.
  • Invoices tell a buyer how much the amount is due for the goods purchased and the due date by which that amount has to be settled. Receipts depict the amount as well as the mode of payment.

Difference between cash invoices and credit invoices

The main difference between cash and credit invoices is the timing of the payment. With cash invoices, the payment is settled almost immediately, whereas, with credit invoices, the payment is settled at a later date.