What Is the Document for Buying Items on Account?

When a business acquires goods or services without immediate payment, this transaction is known as “buying items on account.” The primary document formalizing this purchase and requesting payment from the seller’s side is typically called an “invoice.” From the buyer’s perspective, this same document is often referred to as a “bill” or “vendor bill.” Its fundamental purpose is to formally notify the buyer of the amount owed and the terms of payment for the goods or services received.

Understanding the Document

An invoice serves as a commercial document that itemizes and records a transaction between a buyer and a seller. From the seller’s viewpoint, it is an invoice indicating revenue earned and an amount to be collected, known as accounts receivable. Conversely, for the buyer, the same document is a bill or vendor bill, representing a liability or an outstanding amount owed, which is recorded as accounts payable. This document is a formal record, crucial for both parties to track financial obligations and ensure accurate accounting.

The invoice’s core function is to provide a clear and undeniable record of the transaction. For the seller, it acts as a request for payment and helps monitor outstanding balances. For the buyer, it acknowledges a financial obligation and serves as proof of purchase, which is important for budgeting and expense tracking.

Key Details on the Document

A typical invoice contains several key pieces of information that ensure clarity and proper record-keeping for both parties. It prominently displays the seller’s name, address, and contact details, along with the corresponding information for the buyer. Each invoice is assigned a unique identifier, known as an invoice number, which allows for systematic tracking and referencing of the transaction. The date of issue is also specified, establishing the starting point for payment terms and due dates.

When applicable, a purchase order (PO) number may be included, linking the invoice to the buyer’s initial purchasing record. The document provides a detailed description of the goods or services provided, including quantities and the unit price for each item. These details lead to a subtotal, to which any applicable sales tax is added, resulting in the total amount due.

Payment terms are explicitly stated, indicating when payment is expected (e.g., “Net 30” meaning payment is due within 30 days from the invoice date) and accepted payment methods.

Processing the Document Internally

Upon receiving a bill or vendor invoice, a company’s accounts payable department initiates a structured internal process to manage the financial obligation. The initial step involves the receipt of the document, often via mail or email, followed by an immediate review for completeness and legibility. This is succeeded by a verification step, commonly known as a “three-way match.” This process compares the invoice against the original purchase order and the receiving report, which confirms that the goods or services were indeed received as ordered. This matching helps prevent errors, duplicate payments, or fraudulent invoices.

Once the invoice is verified and any discrepancies are resolved, it proceeds to an internal approval process. This typically involves routing the document to the appropriate department or authorized individual for payment authorization, ensuring that the expenditure is legitimate and approved. Following approval, the liability is formally recorded in the company’s accounting system. The invoice is then added to a payment schedule based on its due date and the agreed-upon payment terms. Finally, the document is securely filed or archived for record-keeping, audit purposes, and future reference.