Purchase invoice

Purchase invoice is a document (paper or electronic) that confirms, for example, the purchase of services, materials or commercial goods subject to VAT . Two invoice copies go to two separate persons - buyer and seller. The invoice is a formal confirmation of the transaction. It should be kept for 5 years, counting from the end of the calendar year.

Elements of the purchase invoice

The purchase invoice, like any other document, must have obligatory elements basic data :

• the word "invoice"
• date of issue (should not be later than in the month following the supply/performance)
• an invoice number (the invoice must contain a serial number with one or several numerical series which are used only once for identification purposes),
• names and surnames of the seller and buyer and their addresses,
• VAT identification number of the seller and buyer,
• date of delivery or other performance or period to which the performance is related,
• description of the supply (quantity and identification) or service (nature and volume),
• the measure and amount of goods sold or the range of services provided,
• net unit price of goods or services,
• the net value of the goods or services provided
• tax rate or, where applicable, reference to exemption or reverse charge.
• the sum of net sales value with division into sales covered by individual tax rates,
• the amount of tax on the sum of the net sales value of goods (services),
• the total amount of receivables,
• terms of the transaction,
• payment deadline,
• additional information: method of receipt, place of delivery.

The recipient is obliged to check the correctness of all data on the invoice he has received. You should pay attention to:

• your company's data - are consistent and complete. If they are incorrect, the buyer has the right to issue a corrective note,
• the document has information about the unit of measurement and the quantity of goods or services sold - in the case of invoices issued manually, these two things are often ignored by issuers,
• net unit price - is it compatible with the information on the order,
• NIP-EU of the seller and buyer - in the case of WDT or the import of services from contractors from the European Union and the application of 0% or "non-payable" rates,
• information about settled advances - if you receive a final invoice.

Accounting the purchase invoice

Operations related to the purchase of goods, materials and services based on purchase invoices, payable later, are accounted to:

• gross value from the invoice: "Settlements with suppliers" - increasing commitment to suppliers,
• net value from the invoice: "Goods", "Materials" - increasing in the status of materials or goods when stocks are taken into warehouse, "Foreign services" - increasing the cost of foreign services, "Material and energy consumption" - increasing the cost of materials consumption, when materials are issued direct after their purchase for consumption.
• the value of input VAT: "Settlements for VAT:

Commitment due to purchase of fixed assets with deferred payment are booked to the account Other settlements. In the case of cash payment, the purchased assets are booked to the "Cash".

Advantages of Purchase invoice

Purchase invoices come with a range of advantages, including:

• Improved accuracy and accountability - Purchase invoices are a great way to ensure accuracy and accountability, as it clearly outlines the terms of the purchase, the items being purchased, and the cost of each item. This helps to reduce errors and ensure that all transactions are accounted for properly.
• Streamlined record-keeping - Purchase invoices make it easy to track and record the transactions since they provide an organized and detailed record of the purchase. This helps to streamline bookkeeping and ensure that all transactions are accounted for properly.
• Tax compliance - Since purchase invoices include all of the necessary information to comply with tax laws, they make it easier to file taxes accurately. This helps to ensure that all taxes are paid on time and in the correct amount.
• Improved customer relations - Purchase invoices are a great way to maintain good relations with customers, as they provide a detailed record of the purchase and the terms of the transaction. This helps to ensure that customers are satisfied with their purchase and that any disputes are resolved quickly and fairly.

Limitations of Purchase invoice

The purchase invoice has several limitations that should be taken into account when preparing it. These include:

• The invoice must be issued in the same currency as the transaction, otherwise it is not valid.
• The invoice must include the full details of the buyer and seller, including names, addresses, and contact details.
• The invoice must include the date of transaction, the quantity and description of the goods or services purchased, the price, any discounts or additional charges, the total amount due, and the payment terms.
• The invoice must include the applicable VAT rate and the total amount of VAT due.
• The invoice must be signed and dated by the seller.

Other approaches related to Purchase invoice

Purchase invoice is an important document in the process of a business transaction and is used to record the exchange of goods, services, or money between two parties. There are other approaches that can be taken in order to ensure the accuracy and legality of the transaction. These include:

• Creating a purchase order, which is a contractual agreement between a buyer and seller that lists the goods, services, and prices to be exchanged. This document often serves as the basis for the creation of the purchase invoice.
• Keeping track of the transaction in an accounts payable ledger, which is a comprehensive record of all the money that a company owes to its vendors. This ensures that vendors are paid on time and the company remains in compliance with its financial obligations.
• Ensuring that all transactions are properly documented, including the date of the transaction, the quantities of each item purchased, and the prices paid. This helps to ensure accuracy and legality.

In summary, purchase invoices are an important document that are used to record the exchange of goods, services, or money between two parties. Other approaches to ensure accuracy and legality include creating a purchase order, keeping track of the transaction in an accounts payable ledger, and ensuring that all transactions are properly documented.

Footnotes

Purchase invoice — recommended articles

Proof of posting — Sales ledger — Purchases ledger — Purchase ledger — Receiving report — Purchase account — Debit Note — Credit memorandum — Dispatch note

References

• Alston R., (2009) Compliance Importance of Invoice Content Managing Imports & Exports. Issue 5
• Novilia N., (2011)Indonesia: The importance of tax invoice International Tax Review. Vol. 22.
• Pefianco, EC, Mercado, EC (2005). Accounting process: principles and problems Goodwill Trading Co, p. 68
• Gilbertson C.B., Lehman M. W., Harmon-Gentene D. (2014) Century 21 Accounting General Journal South-Western Cengage Learning.

Author: Marta Bodzioch

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