Invoice vs receipt vs bill: the differences explained

Invoice, receipt and bill: the short answer

An invoice is a document a seller issues to request payment for goods or services supplied, and it creates a receivable. A bill is the same document seen from the buyer's side, and it creates a payable. A receipt is proof that payment has been made. The difference matters because each document triggers a different accounting entry and, for VAT and GST, a different legal right.

The three are often confused because everyday language blurs them. A restaurant hands you a bill before you pay and a receipt afterwards; a utility company sends a bill that is legally its invoice; a till slip in a shop is usually both a simplified invoice and a receipt at the same time. Accountants separate them by asking two questions: does this document create an obligation to pay, and does it prove that a payment happened?

This guide explains each document, the related documents that sit around it (quotation, pro forma invoice, purchase order, delivery note, credit note and debit note), the journal entries they generate, and what the law requires an invoice to contain in the European Union and in Canada.

Quick reference: who issues what, and what gets posted

The list below is the shortest reliable way to tell the documents apart. The examples use a supply of EUR 1,000 plus 20% VAT, so the gross amount is EUR 1,200.

• Quotation or estimate: issued by the seller before any agreement; no accounting entry.
• Purchase order: issued by the buyer to commit to a purchase; no ledger entry, but it is the first leg of the three-way match.
• Pro forma invoice: issued by the seller as a preview or to request an advance; not a tax invoice and no revenue entry.
• Delivery note: issued by the seller with the goods; proves delivery and supports cut-off, but carries no price entry by itself.
• Sales invoice: issued by the seller; Dr Trade receivables 1,200 / Cr Revenue 1,000 / Cr VAT payable 200.
• Supplier bill (the supplier's invoice as received): Dr Purchases or expense 1,000 / Dr VAT recoverable 200 / Cr Trade payables 1,200.
• Receipt: issued by the party that received the money; seller side Dr Bank 1,200 / Cr Trade receivables 1,200.
• Credit note: issued by the seller to reduce an invoice; for a EUR 100 net credit, Dr Revenue 100 / Dr VAT payable 20 / Cr Trade receivables 120.

What an invoice is and what it does

An invoice has three jobs. Commercially, it states what was supplied, at what price and when payment is due, so it is the basis for chasing the customer. In accounting, it is the source document for recognising revenue and a trade receivable under the accrual basis. For tax, a valid VAT or GST invoice is the evidence the buyer needs to deduct input tax, which is why tax law, not accounting standards, dictates what an invoice must show.

An invoice does not decide when revenue is recognised. Under IFRS 15 revenue is recognised when control of the goods or services passes to the customer, which can be before or after the invoice date. A company that invoices an annual subscription in January records a contract liability, not twelve months of revenue, and releases it month by month; our guide on deferred revenue works through that schedule. The invoice date matters more for VAT, where it can fix the tax point.

Once issued, an invoice should never be deleted or edited in place. Tax authorities expect a continuous sequence of numbers, and a gap or a silently changed amount is a classic audit finding. The correct way to change an issued invoice is a credit note, followed by a new invoice if needed.

What a bill is: the buyer's view of the same document

In accounting systems, bill usually means a supplier invoice that the business has received and must pay. Nothing about the paper changes; the word describes the direction. The seller's invoice number becomes the buyer's supplier reference, and the buyer records its own internal document number for the payable.

Before a bill is posted, a well-run accounts payable team performs a three-way match: the purchase order shows what was ordered and at what price, the goods received note shows what arrived, and the bill shows what the supplier is charging. Only when quantities and prices agree within tolerance is the bill approved for payment. For a bill of EUR 1,000 plus EUR 200 VAT the entry is Dr Purchases 1,000 / Dr VAT recoverable 200 / Cr Trade payables 1,200.

Input VAT should be claimed only when the business holds a document that meets the legal invoice requirements. A statement of account, a pro forma or a payment reminder is not enough, even if it shows the correct amount of tax.

What a receipt is and when it matters

A receipt proves that money changed hands. It records the payer, the payee, the date, the amount and the method, and ideally the invoice it settles. When a customer pays an invoice of EUR 1,200 by bank transfer, the seller posts Dr Bank 1,200 / Cr Trade receivables 1,200. The receipt does not create revenue; the revenue was recognised when the goods or services were delivered.

In a cash sale the invoice and the receipt collapse into one document. A shop's till slip records the sale and the payment at the same moment, so the entry goes straight to cash: Dr Cash 1,200 / Cr Revenue 1,000 / Cr VAT payable 200. In most VAT systems that slip is a simplified invoice, which is why it must show at least the supplier's identity, the date, what was sold and the tax.

An internal receipt voucher is also used when cash is received without an invoice, for example a customer deposit, a loan drawdown or a refund from a supplier. Each needs its own supporting document so the auditor can follow the cash to its source.

Pro forma invoices, quotations and customer deposits

A pro forma invoice looks like an invoice but is a preview: it tells the buyer what the final invoice will be, often so the buyer can arrange payment, an import licence or a letter of credit. It is not a tax invoice, it does not create a receivable and it should not carry a number from the tax invoice sequence. Posting pro formas as sales is a common cause of overstated revenue.

If the customer pays in advance against a pro forma, the seller has received cash for something not yet delivered, which is a liability. The entry is Dr Bank 5,000 / Cr Customer deposits (contract liability) 5,000. When the goods ship, the final invoice is issued and the deposit is applied against it. Under the EU VAT Directive, VAT generally becomes chargeable when a payment on account is received before the supply (Article 65), so the seller may owe VAT on the advance even though no revenue has been recognised.

Credit notes and debit notes

A credit note reduces or cancels an invoice that has already been issued: goods returned, a price error, a volume rebate or a cancelled service. It must refer to the original invoice so both parties, and the tax authority, can link the correction to the supply. For a return of goods sold at EUR 100 plus VAT, the seller posts Dr Sales returns 100 / Dr VAT payable 20 / Cr Trade receivables 120, and the buyer posts the mirror entry against its payable and its input VAT.

Debit note has two meanings, which causes confusion. In some countries and systems it is a document the seller issues to increase the amount of an earlier invoice, for example when a price was undercharged. In others, notably in purchasing, it is a document the buyer sends to the supplier to claim a credit for returned or faulty goods. Always check which convention a counterparty uses before posting one.

Neither note should ever be used to create a supply from nothing. A credit note without an original invoice, or a debit note used instead of a proper invoice, breaks the audit trail and can invalidate the tax treatment.

What a VAT invoice must contain in the European Union

Across the EU the minimum content of a full VAT invoice is set by Article 226 of the VAT Directive (Council Directive 2006/112/EC); member states add national details, such as language or retention rules, on top. The Directive also allows simplified invoices with fewer details where the amount does not exceed EUR 100 (Article 220a), subject to each member state's choices.

Electronic invoicing is changing how invoices travel but not what they must say. As of September 2026, the VAT in the Digital Age package, Council Directive (EU) 2025/516 adopted on 11 March 2025, makes structured e-invoicing and digital reporting the norm for intra-EU business-to-business supplies from 1 July 2030, while several member states run their own domestic mandates earlier; see our guide on EU e-invoicing mandates for the country timeline.

• Date of issue and a unique sequential number.
• The supplier's VAT identification number, and the customer's where the customer is liable for the tax, as in reverse charge or intra-EU supplies.
• Full names and addresses of supplier and customer.
• Quantity and nature of the goods, or extent and nature of the services.
• Date of supply or of payment on account, where it differs from the invoice date.
• Taxable amount per rate or exemption, unit price excluding VAT, and any discounts not included in the unit price.
• The VAT rate applied and the VAT amount payable.
• The reason for any exemption or a reverse-charge reference where no VAT is charged.

Invoice information required in Canada for GST/HST

Canada does not prescribe one invoice format. Instead, the Canada Revenue Agency sets out the information a buyer must hold to claim an input tax credit, and the requirement grows with the total amount of the sale. A business that sells to GST/HST registrants should print everything in the top tier so every customer can claim.

As of September 2026, the CRA guide for GST/HST registrants (RC4022) sets three tiers. The thresholds apply to the total amount paid or payable, including tax.

• Under CAD 100: the supplier's business or trading name (or an intermediary's name), the invoice date, and the total amount paid or payable.
• CAD 100 to 499.99: all of the above, plus the supplier's GST/HST registration number, the total GST/HST charged or a statement that the price includes it at the applicable rate, and the status of each supply where taxable and exempt items are mixed.
• CAD 500 or more: all of the above, plus the buyer's name or trading name (or authorised agent), a brief description of the goods or services, and the terms of payment.

Common mistakes with invoices, receipts and bills

Most document errors surface either at the VAT return or at the audit. The list below covers the ones that cost money or credibility most often, and all of them are prevented by clear document types and a rule that issued documents are corrected, never deleted.

• Recording a pro forma or a quotation as a sale, which overstates revenue and receivables.
• Deleting or editing an issued invoice instead of issuing a credit note, leaving a gap in the number sequence.
• Claiming input VAT on a statement, reminder or pro forma rather than on a valid tax invoice.
• Posting a supplier bill twice because it arrived by email and by post; match on supplier and supplier invoice number.
• Treating a customer receipt as revenue when the invoice was already recorded, which double-counts the sale.
• Issuing a credit note without referring to the original invoice number.
• Mixing up debit note conventions with a supplier and booking an increase as a reduction.

How Skyline Nexus ERP handles invoices, receipts and notes

In Skyline Nexus ERP each document type is kept distinct. Quotations, proformas, sales orders and delivery notes live in the sales and POS area alongside final invoices, and when sales auto-posting is switched on only final sales and sales returns create journals: drafts, quotations and proformas are skipped. A final sale posts Dr accounts receivable, Cr revenue and Cr VAT output, with output VAT computed per line in the same way as the tax report. Invoice numbering is set per scheme (prefix, start number, digits) and each business location chooses its scheme for POS and for sales, with separate invoice layouts for the simplified POS invoice and the standard invoice.

Corrections follow the credit note route. A sales return is a credit note, several partial returns can be made against one invoice, and returns post a reversing journal for revenue, VAT and cost of sales when auto-posting is on. Sales debit notes and purchase debit notes are separate documents. For Saudi businesses, once an invoice has been reported to or cleared by ZATCA it can no longer be edited or deleted, and the screen directs the user to a credit note or debit note. On the cash side, the Treasury module has its own Receipts and Payment Vouchers, and customer and supplier payments post their own journals when payment auto-posting is switched on, so the receipt stays a separate record from the invoice it settles.