Invoice

An Invoice is a non-negotiable instrument which indicates the indebtedness of the

purchaser to the seller. The seller gives it to the buyer for making a request for payment
for the goods sold or services rendered to him. It is used to record day to day the sale
transaction.

A typical invoice may contain the following details:

 Date of issue of invoice

 Invoice Number
 Name and address of buyer
 Name and Address of Seller
 Unit Price of Goods
 Quantity
 Discount (if any, but only trade discount)
 Tax (VAT or Service tax as the case may be)
 Total Amount due
 Signature of the seller or his authorized age

Types of Invoice
What Are the Different Types of Invoices?
The different types of invoices that businesses can create for their clients are:

1. Standard Invoice

A standard invoice is issued by a business and submitted to a client. This is the most
common form of invoice that small businesses create and the format is flexible enough
to fit most industries and billing cycles. Standard invoices include the following details
about the sale:

 The business’s name and contact information

 The client’s name and contact information
 An invoice number
 The amount of money the client owes the business for its services

2. Credit Invoice

A credit invoice, also called a credit memo, is issued by a business that needs to
provide a client with a discount or a refund, or to correct a previous invoicing error. A
credit invoice will always include a negative total number. For example, if you’re
providing a credit invoice to a client to detail a $50 refund, the total on the credit invoice
would be -$50.

3. Debit Invoice

A debit invoice, also called a debit memo, is issued by a business that needs to

increase the amount a client owes to the business. Debit invoices can be useful to small
businesses and freelancers when they need to make a slight adjustment to an existing
bill. For example, if you sent a client an invoice based on your estimated hours and you
ended up working additional hours on a project, you could send the client a debit invoice
for the additional hours billed. Debit invoices are always written as positive numbers.

4. Mixed Invoice

Mixed invoices combine credit and debit charges on one invoice, and the total amount
can be expressed as either a positive or negative number. Small businesses rarely
need to create mixed invoices for their services, but it could be necessary if you’re
reducing the amount a client owes for one of the projects you’re billing for and
increasing the amount owing for a different project billed on the same invoice.

5. Commercial Invoice

A commercial invoice is issued by a business for goods that it sells to customers

internationally. Commercial invoices include details of the sale that are needed to
determine customs duties for cross-border sales. The information included on a
commercial invoice includes:

 Shipment quantity
 Weight / volume
 Description of goods
 Total value
 Packaging format

6. Timesheet Invoice

A timesheet is an invoice used when a business or employee is billing based on the

hours they work and their standard rate of pay. Timesheets are used by contract
employees who are paid hourly by their employer. They’re also common in industries
where clients are billed hourly, including by:

 Lawyers
 Creative agencies
 Business consultants
  Psychologists

7. Expense Report

An expense report is a type of invoice that an employee submits to an employer for

reimbursement of business-related expenses. For instance, if you send an employee to
a lunch meeting with a client, they can create an expense report to invoice your
company for the cost of the lunch, parking and gas that they paid up front.

8. Pro Forma Invoice

A pro forma invoice is an estimated invoice that a business sends to a client before
providing their services. A pro forma invoice provides the client with an estimated cost
of the work to be completed. Pro forma invoices may have to be altered once a project
is complete to accurately reflect the hours worked.

9. Interim Invoice

An interim invoice is used for billing on large projects where the business and the client
have agreed to terms that include multiple payments. A business or freelancer will
submit interim invoices when certain milestones are completed toward the larger
project. Interim invoices help small businesses manage their cash flow while working on
projects over long periods of time.

10. Final Invoice

A final invoice is sent to the client once a project has been completed to request
payment. The final invoice is usually more detailed than a pro forma or interim invoice
and typically includes the following:

 An itemized list of all services provided

 Total cost of the project
 Invoice number
 Invoice due date
 Payment methods accepted

11. Past Due Invoice

A past due invoice is sent by a business if their client doesn’t provide payment by the
due date listed on the final invoice. You should send past due invoices to clients as
soon as they miss a payment due date. Past due invoices include all the service and
payment details listed on the final invoice and they also include any late fees
or interest charges.
12. Recurring Invoice

Recurring invoice are useful for businesses that charge clients the same amount
periodically for their services. Recurring invoices are common among IT businesses,
who charge their clients the same amount each month for a package IT service. Or, if
you’re a freelance digital marketer, you might offer social media marketing packages to
your clients with standard pricing per month. Cloud-based invoicing software lets you
automate the process of creating recurring invoices and can even send out the invoices
on the same day each month, so you don’t have to think about it.

13. E-invoice

E-invoice is a blanket term applied to any invoice sent electronically, regardless of the
specific type of invoice being sent. E-invoicing is becoming standard practice among
small businesses and freelancers. E-invoices are quicker and easier to create than
standard print invoices and they help you get paid faster for your services.

What Is a Purchase Invoice?

A purchase invoice is a commercial document that a seller provides to a buyer that
outlines the goods or services purchased, the quantity sold and the sale price. Purchase
invoices are used to prove a product or service was bought and the amount paid for it.

What Is a Sales Invoice?

A sales invoice is a document that a business sends to a client to request payment for
their products or services. A sales invoice includes a description of the product or
service sold, the quantity and the price. Sales invoices serve as an official record of a
sale for both the buyer and the seller.

Sales Invoice vs. Billing Invoice

1. Sales Invoice is used for sale of goods while Billing Invoice is used for sale of
service

If your company is selling goods or items, remember to use a Sales Invoice every time
you have a sale to customer, regardless if its cash or on credit.

If your company is engaged in sale of service or lease of properties, you may use a
Billing Invoice to detail your services and its equivalent fee to be collected from you
customers. You may opt not to register and use Billing Invoice if your sale of services
are paid immediately in cash.
2. Sales Invoice is a primary sales document for sale of goods while Billing
Invoice is a supplemental sales document for sale of service

Sales Invoice is considered the primary or most important document for sale of goods
because it is the legal proof that a sale or transfer of goods has happened. As such,
when you register your sales document to BIR, always ensure that if you are selling
goods or items, you must register a Sales Invoice.

On the hand, Billing Invoice is considered a supplemental document for sales of

services or lease of properties. It is not as important as an Official Receipt. It is usually
used only to bill customers or clients without the guarantee that the sale happened or
was cancelled. As such, when you register your sales document to BIR, analyze first
your company sales process if there is a need to register a Billing Invoice.

3. Sales Invoice can also be Cash Invoice or Charge Invoice while Billing Invoice
can also be Service Invoice or Statement of Account

In general, sale of goods is supported by a Sales Invoice. However, it is also allowed to

register an alternative which they refer to as Cash Invoice or Charge Invoice. Cash
Invoice is like a sales invoice, but it is used particularly for cash sale of goods. On the
other hand, Charge Invoice is also like a sales invoice, but it is used particularly for sale
of goods on credit or on account. Which means the sale is not paid immediately but will
be paid on a future date.

On the other hand, Service Invoice or Statement of Account is also alternately

registered and used instead of Billing Invoice. But the three (3) have same purpose, that
is to bill the client on the services to be provided, or have been provided, but is not yet
collected from or paid by customer.

4. Sales Invoice details the goods or item sold such as quantity, unit of
measurement, item or article name, unit price, and the total amount. Billing
Invoice only shows description or particulars of the service sold and the amount.

5. Sales Invoice is valid for claiming input tax while Billing Invoice is not valid for
claiming input tax

6. Sales Invoice is linked to Collection Receipt while Billing Invoice linked to

Official Receipt

7. Sales Invoice is a mandatory or required document to be registered with BIR

while Billing Invoice is not mandatory or required document to be registered
8. Sales Invoice are recorded in the books while Billing Invoice may not be
recorded in the books

Sales Invoice

As we already know by now, Sales Invoice is a primary document for sale of

goods. It is issued regardless if the sale is cash or payable in the future. As such,
when Sales Invoice is recorded, it is recorded as either cash or accounts
receivable. See sample accounting entry (NON-VAT):

Debit: Cash or Accounts Receivable                       Pxx

  Credit: Sales                                                                             Pxx

Billing Invoice

is a supplemental document for sale of service. It may or may not be issued and at the
same time it may or may not be recorded depending on the sales process and
accounting method of the company. Usually, the Billing Invoice is used and recorded
when a service company bills their client in advance of payment in date and their using
accrual method of accounting. As such, when Billing Invoice is issued, it is recorded as
accounts receivable. See sample accounting entry (NON-VAT):

Debit: Accounts Receivable                                      Pxx

  Credit: Sales                                                                             Pxx

As a primary sales document, Sales Invoice is valid for claiming input tax. This is
particularly important for VAT-Registered businesses who purchases goods from
another VAT Registered Company.

On the other hand, Billing Invoice, as a supplemental sales document, is not valid for
claiming input tax. In fact, it is explicitly written at the bottom of a Billing Invoice that
such is not valid for input tax. You may refer to the sample highlighted in red of the
Billing Invoice below.
BAcknowledgement Receipt
- a confirmation that a letter/product/payment has been received. idiom. to
acknowledge, to confirm receipt of (a letter): to confirm that (a letter) was
received. idiom.
Cash and credit Invoice

Cash Memo is also a non-negotiable commercial instrument indicating, the cash has
been received from the purchaser for the goods sold to him. It works as a proof of cash
payment made. When the cash is received for the sold goods, no debit is raised against
it. The cash memo contains the following description:

 Date
 Serial Number
 Name and address of supplier
 Name and address of buyer
 Unit price of goods
 Quantity
 Discount (if any, both for trade and cash discount)
 Tax (VAT or Service tax as the case may be)
 Total Amount Received
 Signature of the cashier.

Key Differences Between Invoice and Cash Memo

The difference between invoice and cash memo can be drawn clearly on the following
grounds:

1. An instrument indicating the payment due against any goods sold or services
rendered is invoice. Conversely, an instrument indicating cash payment made for
the merchandise is known as a cash memo.
2. An Invoice is raised before the payment while cash memo is raised when the
payment is made.
 3. An Invoice is issued for the credit transaction as a proof of amount due, whereas
cash memo is issued for cash transaction as a proof of the amount received.
4. Signature of the seller or his agent is there in the invoice. On the other hand
signature of cashier is found in the cash memo

Similarities

 Non-negotiable commercial document.

 Raised by the supplier of goods or services.
 Sent to the purchaser or receiver of goods or services.

When do you use collection receipt?

What is authority to print?

All persons who are engaged in business shall secure from the BIR an Authority to Print
receipts or sales or commercial invoice before a printer can print the same.

TAX FORM

BIR Form 1906 (Jan 2000 ENCS) – Application for Authority to Print Receipts and
Invoices

DOCUMENTARY REQUIREMENTS

› Final & clear sample of principal and supplementary receipts/invoices

› Photo copy of last issued ATP or Printer's Certificate of Delivery (PCD) or any booklet
from the last issued ATP for subsequent application

PROCEDURES

› For taxpayers:

a. Accomplish BIR Form 1906 and submit the same together with the documentary
requirements to RDO where the HO is located or concerned office under the Large
Taxpayer Service;

b. Keep/File PCD and ATP copy duly received/issued by BIR for audit purposes;

c. Taxpayer’s branch office shall furnish its RDO a copy of the ATP issued by the
appropriate BIR office having jurisdiction over the head office.

› For the printer/supplier:

a. Prepare Printer’s Certificate of Delivery (PCD) in five (5) copies and submit to
RDO where the place of business is located or concerned office under the Large
Taxpayer Service within thirty (30) days from date of ATP and prior to delivery of
receipts and/or invoices to taxpayer;

b. Furnish the taxpayer and its branches copy of the received PCD and approved
ATP together with the taxpayer’s Sworn Statement within thirty (30) days from
the issuance of PCD. One copy thereof shall likewise be submitted to the BIR
Office that has jurisdiction over the head office of the printer.

DEADLINES

› Secure Application for Authority to Print Receipts and Invoices on or before the
commencement of business

FREQUENTLY ASKED QUESTIONS

1) How can the taxpayer determine if he is under a computerized or a non-computerized

RDO?

Click Here for the List of Computerized and Non-Computerized

2) Who will stamp the printed receipts and invoices?

Stamping shall be done by the Taxpayer Assistance Section of the RDO having
jurisdiction over the establishment which will issue the invoice/receipt
3) What are the essential features of the receipts or invoices?

Invoices or receipts must be serially numbered and shall show, among others, the
following:
Name of the Professional/Business/Commercial Establishment
Business Style – business name
Taxpayer Identification No.
Business Address of the Person/Entity
Others like:

- Space for date of transaction

- Space for customer name and address
- Serial Number of invoice or receipt
- ATP Number and series approved
- Printer information

4) What are the basic information required to be reflected on Invoices and Receipts
issued by Financial Institutions?

a) name, TIN (with suffix of the word VAT), business style, if any, and address of the
financial institution
b) date of transaction
c) name, TIN, business style, if any, and address of the VAT-registered client;
d) description of the nature of transaction
e) the invoice value or consideration, showing the VAT separately
f) total amount billed and received; and
g) such other information, as required in Section 237 of the Code.

5) Are tape receipts (cash register machine or point of sales machine tape) considered
as an official receipt/invoice?

Yes, as long as the tape receipts are generated from a BIR-registered CRM/POS, as
evidenced by the BIR sticker attached to the machine duly signed by the RDO.

A ‘receipt’ is an umbrella term for different kinds of source documents or

electronic references that record transactions, including invoices, purchase invoices,
note payables, credit card slips, and salary rosters.

VAT Taxpayers
1. Engaged in Sale of Goods or Properties
If you are a VAT registered taxpayer engaged in sale of goods or properties, you will
need to issue the following:
a. VAT Sales Invoice
Sales invoice is issued by the seller to the buyer as written evidence on sale of goods or
properties in an ordinary course of business, whether cash or on account (credit).
Sales invoice list down the details of the items or goods sold. It will also be the basis of
the output tax liability of the seller and the input tax claim of the buyer.
b. VAT Collection Receipt
Collection receipt is issued by the seller to the buyer as acknowledgement on receipt of
cash and/or payment of goods sold.
When you issue a collection receipt, indicate the sales invoice number to which the
collection pertains to.
Note: When the taxpayer is engaged in sale of goods or properties, it will need to
issue a sales invoice when the goods is sold to the buyer, whether cash or on
credit. If the sale was on credit, the seller will then issue an collection receipt
upon receipt of cash as payment from the buyer. If the sale was paid on cash, the
cash invoice is enough.

2. Engaged in Sale of Services

If you are a VAT registered taxpayer engaged in sales of services, you will need to
issue the following:
a. VAT Official Receipt
Official receipt is issued by the seller to the buyer as written evidence on sale of
services or leasing of properties, as well as acknowledgement on collection of cash
payment on services rendered.
It serves as the basis of the output tax liability of the seller and input tax claim of the
buyer.
Note: When the taxpayer is engaged in sale of services or leasing of property, it is
not necessary to issue a sales invoice since there are no items or goods
involved. Alternatively, the taxpayer may use Service Invoice or Billing Statement.
Non-VAT Taxpayers
1. Engaged in Sale of Goods or Properties
If you are a Non-VAT registered taxpayer engaged in sale of goods or properties, you
will need to issue the following:
a. Non-VAT Sales Invoice
Sales invoice is issued by the seller to the buyer as written evidence on sale of goods or
properties in an ordinary course of business, whether cash or on account (credit).
Sales invoice list down the details of the items or goods sold. It will also be the basis of
the percentage tax liability of the seller.
b. Non-VAT Collection Receipt
Collection receipt is issued by the seller to the buyer as acknowledgement on receipt of
cash and/or payment of goods sold.
When you issue a collection receipt, indicate the sales invoice number to which the
collection pertains to.
Note: When the taxpayer is engaged in sale of goods or properties, it will need to
issue a sales invoice when the goods is sold to the buyer, whether cash or on
credit. If the sale was on credit, the seller will then issue an collection receipt
upon receipt of cash as payment from the buyer. If the sale was paid on cash, the
cash invoice is enough.

2. Engaged in Sale of Services

If you are a Non-VAT registered taxpayer engaged in sale of services, you will need to
issue the following:
a. Non-VAT Official Receipt
Official receipt is issued by the seller to the buyer as written evidence on sale of
services or leasing of properties, as well as acknowledgement on collection of cash
payment on services rendered.
It serves as basis of the percentage tax liability of the seller.
Note: When the taxpayer is engaged in sale of services or leasing of property, it is
not necessary to issue a sales invoice since there are no items or goods
involved. Alternately, the taxpayer may use Service Invoice or Billing Statement.
The difference between an invoice and a receipt
Invoices are issued prior to the customer sending the payment, whereas a receipt is
issued after the payment has been received. The invoice acts as a request for payment,
and the receipt acts as a proof of payment.

What is the difference between invoice and official receipt?

Sales invoice is issued as principal evidence in the sale of goods and/or properties
while official receipt is issued as principal evidence in the sale of services and/or lease
of properties.

What is the difference between a collection receipt and an official receipt?

Once payment is received, a collection receipt, which is different from an Official
Receipt, is then issued to confirm the payment for and sale of the goods.

Acknowledgement Receipt is not an official receipt that is required by the Bureau of

Internal Revenue for persons engaged in business. An Acknowledgement Receipt is
usually drafted by the person making the delivery and is signed by the person receiving
the delivery.

Commercial Invoice
The commercial invoice is a legal document between the supplier and the customer that
clearly describes the sold goods, and the amount due on the customer. The commercial
invoice is one of the main documents used by customs in determining customs duties.

Application for Authority to Print Receipts & Invoices

All persons who are engaged in business shall secure from the BIR an Authority to Print
receipts or sales or commercial invoice before a printer can print the same.

What is a cash invoice and a credit invoice?

An Invoice is raised before the payment while a cash memo is raised when the payment
is made. An Invoice is issued for the credit transaction as a proof of amount due ,
whereas a cash memo is issued for cash transaction as a proof of the amount
received.

What is a credit sales invoice?

A credit invoice or credit note is a statement detailing a refund or credit to an invoice.
For example, you may issue a credit invoice if a customer asks for a refund or if you
decide to give a customer a credit for any reason.