New

Published on:

August 24, 2024

Udeetta Sarma

Blog |

FAQs

GST FAQs

Explore the different types of Invoice

Invoicing in accounting and financial governance is never to be ignored at any level of a business concern. Understanding the Typologies of Invoices can mean more than just understanding how many types there are

All in all, invoices of any type are crucial to improving business effectiveness and efficiency across organisations through compliance assurance as well as elevating accounting & finance management features. Hello and welcome in this blog we will see some common types of invoices their significance under GST and how these are paying roles as a different type for accounts payable invoice formats vs SAP Invoice.

What is an Invoice in Accounting?

An invoice is a business document that the seller delivers to the buyer. This chart is an overview of what products or services are being provided, their quantities and the cost they have been set to. In a nutshell, it's an invoice detailing what work has been done or goods delivered and agreed prices. If a business needs to be paid, it sends an invoice. By date, Invoice number, Customer contact & Payment terms this document (Bill) updates the accounting records of a business and serves as evidence for the transaction.

Types of Invoices in Accounting

1. Standard Invoice

Invoices are part of everyday business. These are used for everyday transactions between sellers and buyers. Every purchase transaction is documented in a regular invoice with trade details matters. Perhaps you will recognise these as they are frequently transmitted to your inbox and enable payment for goods or services in advance of their actual receipt.

2. Proforma Invoice

A proforma invoice is issued before the buyer has committed legally to buying goods or services. Rather, it is like a "cost of quote" for shipping/delivery charges on said goods.

3. Credit Invoice

This is a credit note. It is sometimes referred to as a credit memo. Merchants issue these invoices when they need to refund a buyer or give one a discount. This invoice indicates by how much and for what reason the original, incorrect invoice is being adjusted. The credit note is reflected as a reduction in the total accounts receivable balance of the merchant. It restores the buyer to the correct balance, as well as the seller.

4. Debit Invoice

This is a debit note. It is sometimes called a debit memo. Merchants issue these invoices when they need to bill a buyer for additional work not accounted for before. This invoice gives one an idea of how much and why the original, insufficiently covering invoice is being adjusted. The debit note indicates that the total amount due is being increased by the merchant.

5. Timesheet Invoice

Timesheets are crucial, especially if you work as a freelancer or service provider and invoice according to worked hours. This means that with a timesheet invoice, it is the rate per hour over the time worked. A freelancer's invoice begins with the timesheet, or journal of hours worked - detailing what work was done when and for how many hours.

6. Expense Report

An expense report is a professional, internal document from which an employee requests reimbursement of expenses paid in some cases for business travel or in itself. It includes the receipts for the expenses and explains what was spent on them, and why.

Types of Invoices in GST

In India, businesses have to follow certain invoicing guidelines if they are to comply with the Goods and Services Tax (GST). There are different kinds of invoices under GST, which include:

1. Tax Invoice

The tax invoice confirms the supply of taxable goods or services and must be issued when these items are sold. The invoice must display some specific information, such as the GST Identification Number (GSTIN); the HSN (Harmonized System Nomenclature) or SAC (Service Accounting Code) number; the taxable value; and the GST rates applicable to the transaction.

2. Bill of Supply

A bill of supply has to be issued when an exempted good or service is being sold, or the supplier is a composition scheme taxpayer. A taxpayer under a composition scheme pays a certain rate of GST, which will be over and above the amount mentioned in particular "composition scheme" invoices.

3. Receipt Voucher

Receipt Voucher is issued when the amount received in advance is released before the supply of goods or services. Records advance amount with charges (if any).

4. Refund Voucher

A refund voucher is issued when not delivered or supplied as per the advance payment received. This is usually due to non-supply or the like. This voucher functions as a reverse receipt voucher.

5. Payment Voucher

A registered entity that pays an unregistered entity for goods or services provides a payment voucher to the unregistered person. This voucher serves as a detailed record of the payment and any related GST (if applicable).

6. Revised Invoice

If there is any modification needed in the original tax invoice, a revised invoice must be issued within one month from the original date of issue. The revised invoice contains the same particulars as the original, apart from the ones that needed modification.

For more information about sales invoices, visit our blog post: What is a Sales Invoice?

Types of Invoices in Accounts Payable

In accounts payable, invoices are categorized based on their processing and payment requirements:

1. Purchase Invoice

A purchase invoice consists of details needed to be paid for a particular goods and/or services provided by the vendor. This paper is crucial for any business to track what it owes money and run the month, week or even day by its supply of cash. This is essential so that whether a business pays immediately, in instalments or over an extended period, the bill of sale can cater for this.

2. Expense Invoice

An expense invoice is exactly what it sounds like. It's a specific description of spending on behalf of someone related to the business, whether it be an employee (who may have gone on a trip and spent some money), a vendor (who performed services that had associated business expenses), or even the owner-operator of the hiring company (reimbursing themselves for something they did). The cost report needs to be granular enough so that someone reviewing it can tell what was bought and why.

3. Utility Invoice

This is the bill that you receive when, for example, payment for utility services (electricity, water or Internet). This type of invoicing is indispensable if you want to have a service that will work correctly without breaks.

4. Recurring Invoice

This sort of invoice is used when you have to pay for a service or a subscription that you've signed up for. Instead of just taking the money out of your bank account as some companies do, they issue invoices to keep their books in order.

Commercial Invoice vs. Tax Invoice

Feature	Commercial Invoice	Tax Invoice
Usage	International trade	Domestic transactions subject to GST
Purpose	For customs clearance and commercial transaction documentation	For claiming input tax credits and GST compliance
Contents	Product details, value, and terms of sale	Detailed tax information including GSTIN, HSN/SAC codes
Tax Details	Does not include tax details	Includes GST amount charged
Importance	Focuses on commercial aspects of the transaction	Essential for complying with tax regulations and claiming credits

Types of Invoices in SAP

SAP, a widely used enterprise resource planning (ERP) system, categorizes invoices for efficient financial management:

1. FI Invoice

A billing is archived in the SAP system for Financial Accounting(FI) module. This recording is a transaction, done for general accounting purposes. This transaction is tied in with multiple other modules and it links back to financial reporting.

2. MM Invoice

The Materials Management (MM) module in SAP is used for procurement processes. The MM module records an invoice when accounts payable receives it from a vendor and is intended to ensure that the goods receipt and the invoice amount align.

3. SD Invoice

An SD invoice in SAP holds information on a sales transaction. The correct look and feel of the right class and level of sales information are posted in just the right amounts to precise financial accounts at the point of sale. This is required as sales invoicing is a fundamental aspect of any business.

4. AP Invoice

The AP invoice is how the details of a vendor issued to your company are recorded. To ensure the posting of amounts payable to their appropriate financial accounts. It prevents the books of the company from getting messy, in simple terms.

5. AR Invoice

An AR invoice handles the tasks of billing and accounts receivable. It makes sure that the right amounts get posted to the right kinds of accounts in the company's books. And it keeps good track of which invoices have been paid. Adjustments are made only if they make sense for the company's books and its creditors.

Streamline Your Invoicing with Swipe Today!

Effective invoicing management is essential for smooth business operations and adherence to the rules. At Swipe, we offer super solutions to efficiently handle all your invoices, including GST ones. We do this so you can maximize your business's potential and so you can be sure that you are obeying the law. Better still, our platform achieves all this while being both intuitive and easy to use. And when we say easy to use, we mean it: invoicing management is one of the things our platform does best.

Conclusion

Efficient business operations require the ability to decipher the many different types of invoices a company might use. For many companies, that's more of an art than a science, and few tools exist to help. From a standard invoice to a GST-specific one, to an invoice created with an SAP system, we're thankfully at a point where companies can ensure smooth transactions. Provided a business understands the many types of invoices, and how to enhance the processes behind them, invoicing can become a greater financial instrument than it was before.

FAQ

1. What is a Tax Invoice?

A Tax Invoice is what you get when you buy taxable goods or services. It shows the tax amount you're being charged.

2. What is a Bill of Supply?

A Bill of Supply is used for items that are exempt from GST or fall under non-GST goods and services. It doesn't include any tax.

3. When is a Receipt Voucher issued?

You get a Receipt Voucher when you make an advance payment for goods or services that you'll receive later.

4. What is a Debit Note?

A Debit Note is issued by the seller to increase the amount on the original invoice, usually due to extra charges or errors.

5. What is a Credit Note?

A Credit Note is issued by the seller to decrease the original invoice amount, often because of returns or discounts.

6. What are the different invoicing types?

Standard, proforma, credit, debit, mixed, recurring, timesheet, and commercial invoices each serve specific billing purposes.

7. What are the 2 types of invoices on hold?

Pending approval invoices need authorization, while discrepancy-hold invoices have issues like incorrect details or mismatched orders.

8. What is the best type of invoice?

The Standard Invoice is often best due to its versatility and widespread use.

9. What are the three ways of invoice?

Invoices can be processed as paper documents, electronic files, or managed through online invoicing software.

Featured Posts

Importance of Cost Sheet: Why Every Business Needs It

What is P2P Lending: Is It Safe?

ICAI Introduces New Balance Sheet Format for FY 2024–25: What You Need to Know

How to upload GSTR-1 JSON file on GST portal

How to Add Customers to Swipe Billing App

Creating an Export Invoice on Swipe: All Cases

Digital Signature with Swipe: Overview & Steps by step process.

What Is Invoice Number?

Featured Posts

Looking for a billing software?

Quick Links

Learn More

Testimonials