What is a Receipt? Definition, Usages and More

Overview

A receipt is a document that shows the proof of purchase of goods or services rendered by one party for another.

The most common form of a receipt is the printed thermal paper form. However, it can be in digital form or a digitally converted form of the printed receipt.

A receipt serves several benefits for the seller and the buyer. Let us discuss what is a receipt and how does it work.

What is a Receipt?

A receipt refers to an acknowledgment of transferring something from one party to another. It can be in written form, electronic, or any other format as agreed upon by two parties.

Commonly, receipt refers to the purchase receipt of goods/products. When a buyer buys something and pays for it, the seller issues an official receipt to acknowledge the transaction.

A receipt acts a proof of purchase for the customer. It serves different purposes to the seller such as book-keeping, tax records, and financial records.

Official receipts can be used for retail and corporate transactions. The sequence and purpose of the receipt remain the same for both types of transactions. However, in a business transaction, the format of the receipt can be significantly different from a typically thermal printed receipt in a retail transaction.

How Does a Receipt Work?

A receipt is issued by the seller to the buyer of goods or services. It can be in the form of thermal printing, electronic mail, or a digital copy of the transaction.

Once the buyer chooses goods to purchase, the next step is to make the payment. The payment terms can be different depending on the nature of the transaction. Many corporate transactions can have several payments and several receipts.

For retail transactions, the seller issues a single receipt after receiving the payment. The foremost use of the receipt is that it acts as proof of purchase.

The buyer can claim goods by showing the payment receipt. Also, if there are any returns or damage claims, a receipt or proof of purchase is necessary.

See also  Income Statement Under Absorption Costing? (All You Need to Know)

A receipt serves some other purposes for the buyer and seller as well (discussed in detail below).

What is Included in a Receipt?

The exact information captured on a receipt can vary by the issuer. For instance, a cash receipt at a retail store will be different from a receipt issued by a business for inventory purchases.

A typical receipt will include the following informative points generally.

  • The date of the transaction and the payment (full or partial payment).
  • A unique receipt number that works as a document identifier.
  • Transactions details include goods purchased, quantity, and brands of each product. Similarly, it can include details of services rendered.
  • Discount, tax, and other applicable adjustments.
  • The total value of the transaction.
  • A note on the payment method such as through cash, card, or funds transfer.
  • Acknowledgment (through signature or printed name) by the seller.
  • Acknowledgment (through signature or printed name) by the buyer.
  • Credit card or check number if applicable.

Types of Receipts

A receipt can have several uses and thus can take a number of types depending on the issuer and the usage of the receipt.

Here are a few common types of receipts based on the usage and issuer.

  • Cash Receipts are the most common type of receipts that are issued upon receiving cash from the customers.
  • Credit Card Receipt: It is issued if a customer pays using a credit card instead of cash. It serves the same purpose as a cash receipt.
  • Business Receipt: A receipt issued to and by a corporate client for a business transaction.
  • Deposit: It is issued when a customer deposits cash or check in a bank account.
  • Delivery: It is issued as a delivery note for goods delivered from the warehouse.
  • Sales: A common form of receipt is a sales receipt that is issued by a seller after a buyer purchases goods or services.
  • Donation: It is issued by charity organizations when they receive donations.
  • Security Deposit: Usually, it is issued by the landlord upon receiving a security deposit from the tenant.
See also  What is the Responsibility of an Accounting Department?

Receipts and Tax Filing

Many tax regulatory authorities require receipts as proof of expenses. For instance, the IRS requires a taxpayer to keep the receipts of expenses for three to seven years.

Businesses can retain printed or digital receipts to back their expense claims. Similarly, individuals can use the receipts to back their deduction and expense claims.

Typically, a taxpayer can keep the following forms of receipts as a claim for expenses.

  • Cash register tape receipts
  • Credit card receipts or statements
  • Gross receipts, deposit receipts, invoices, and miscellaneous forms used by businesses.
  • Invoice slips
  • Petty cash slips

Receipts once printed can also be stored digitally. Taxpayers can use snapshots, scanners, or other digital tools to keep a record of payments for tax purposes.

Receipt as Proof of Purchase

A receipt primarily acts as proof of purchase for the buyer. It can be the purchase of goods or services acquired from a seller.

The foremost use of the receipt is to provide proof of payment for the buyer. Once a buyer makes a payment, the next step is to produce an acknowledgment. The buyer can then lay claim on purchased goods after receiving the proof of payment.

Similarly, a service provider may issue the proof of purchase of services. The proof would include a description of the services rendered and charges applied.

Proof of receipt is particularly important for warranty claims of goods. A buyer can only negotiate the return or damage claims upon presenting the proof of purchase.

Similarly, a service provider may offer a specific period for any claims on services rendered. These claims may include charges, modifications, and alterations.

Importance of Receipt – For Buyers

A receipt provides several benefits to the buyers of goods or services. These benefits include proof of payment, tax claims, warranty claims, and so on.

See also  Is a Bookkeeper the Same As An Accountant? (All You Need To Know)

From a buyer’s perspective, receipts act as binding documents. They can use receipts for several purposes.

  • Proof of Purchase
  • Expense Deductions for Tax filing
  • Proof of funds transfer
  • Warranty or return claims of goods
  • Alterations or modifications in services
  • Charity donation proof

Importance of Receipt – For Sellers

A receipt is an important document for sellers as well. Since sellers are registered as businesses, they need to keep the accounting records for several purposes.

Some common uses and important points from a seller’s perspective are listed here.

  • A receipt acts as proof of transaction.
  • It helps a business in financial record keeping.
  • Receipts are documented records of sales or revenue for the business.
  • A business can use receipts for tax filing such as sales or VAT tax returns.
  • It acts as a binding document between the buyer and the seller.
  • A business can use the receipt for referencing if the payment is partial or made in installments.
  • Receipts are an important part of the invoicing system run by a business.

Receipt Vs. Invoice – Key Differences and Similarities

An invoice and a receipt are issued by the vendors (or sellers) of products or services. Both serve as documented proofs of transactions between both parties.

There are a few key differences between an invoice and a receipt.

  • An invoice is issued as a requisition for the payment, whereas a receipt is issued after the payment is received.
  • An invoice is a request for the payment while a receipt is the proof of the payment.
  • An invoice is used to track the record of goods sold. A receipt acts as a claim on purchased goods.
  • An invoice can be negotiated by both parties and can have amendments. A receipt is usually non-negotiable as it is a confirmation of the payment.