What Documents Are the Opposite of an Invoice?

An invoice is a formal request for payment issued by a seller to a buyer for goods or services rendered. It details the purchased items, quantity, agreed-upon prices, and total amount due. Understanding invoices helps clarify other related financial documents.

Purchase Order

A purchase order (PO) represents a buyer’s official commitment to a seller to acquire specific goods or services. This document precedes the invoice and originates from the buyer, outlining the types and quantities of products or services, agreed-upon prices, payment terms, and delivery details. Once a seller accepts a purchase order, it becomes a legally binding contract, formalizing the buyer’s intent to purchase.

The primary distinction from an invoice is that a PO initiates the transaction from the buyer’s perspective, signaling an intention to buy. An invoice, conversely, is a request for payment after goods or services have been provided. Businesses use purchase orders to manage procurement, control budgets, track inventory, and ensure clear communication with suppliers. POs also help maintain an audit trail for financial and compliance purposes, preventing unauthorized purchases and aiding expense tracking.

Credit Note

A credit note, also known as a credit memo, is a document issued by a seller to a buyer to reduce or cancel an amount owed on a previously issued invoice. It functions as a direct financial “opposite” to an invoice, as an invoice creates a debt, while a credit note diminishes or reverses it. Common scenarios for issuing a credit note include returned goods, billing errors, damaged shipments, or price adjustments.

This document ensures that both the buyer’s accounts payable and the seller’s accounts receivable accurately reflect the revised amount, providing a clear audit trail for accounting adjustments. A credit note represents a credit on the customer’s account that can be applied to future purchases or used to offset an outstanding balance, rather than a cash refund. For tax compliance, a credit note documents adjustments to invoices that included tax, ensuring accurate reporting.

Receipt

A receipt serves as proof of payment, issued by the seller to the buyer after a financial transaction is completed. Unlike an invoice, which is a request for payment, a receipt acknowledges that payment has been received and the transaction finalized. Receipts provide documented evidence of the exchange of funds for goods or services.

For buyers, receipts aid record-keeping, budgeting, expense tracking, and tax preparation. They are also necessary for processing returns or warranty claims. For sellers, receipts confirm revenue recognition and provide a record for accounting and inventory management, ensuring compliance with tax regulations. A standard receipt includes the date, amount, business name, and a description of the purchase.