At a Glance: The Visual Difference
Before diving into the legal details, here is the quickest way to tell them apart.
INVOICE
"Please Pay Me"
- Has a Due Date
- Lists Payment Options
- Status: Unpaid / Pending
RECEIPT
"Payment Received"
- Has a Payment Date
- Shows Method (e.g. Card)
- Status: Complete
Core Definitions & Purpose
While they both list goods and prices, their function in the transaction timeline is opposite.
What is an Invoice?
An Invoice is a commercial instrument issued by a seller to a buyer. It identifies both parties and lists, describes, and quantifies the items sold, shows the date of shipment and mode of transport, prices and discounts, and delivery and payment terms.
What is a Receipt?
A Receipt is a written acknowledgment that a specified article or sum of money has been received as an exchange for goods or services. It is issued **after** the payment has been processed.
Detailed Comparison Table
| Feature | Invoice | Receipt |
|---|---|---|
| Primary Purpose | Request for Payment / Legal Demand | Proof of Completed Payment / Confirmation |
| Timing | Issued **before** payment | Issued **after** payment |
| Accounting Entry | Accounts Receivable (Dr.) | Cash/Bank (Dr.) vs. Revenue (Cr.) |
| Key Element | Due Date & Payment Terms | Payment Method Used (e.g. Cash/Card) |
| Action Required | Customer must pay | No action (Record keeping only) |
Real-World Scenarios: Which Do You Need?
Freelance Web Designer
You finish a website design project. The client hasn't paid yet.
You need to give them a deadline (Net 30) and banking details to transfer the funds.
Coffee Shop Owner
A customer buys a latte and pays immediately with a credit card.
The transaction is instant. They need the slip for their expense report.
SaaS Subscription
Your software charges a client's credit card automatically every month.
Since the payment is automatic, they need proof that it happened.
Accounting & Tax Impact
Understanding the distinction is vital for accurate bookkeeping and tax filing.
Accounts Receivable vs. Cash
When you send an invoice, you record it as Accounts Receivable (money owed to you). It is considered "Revenue" under accrual accounting, but you don't have the cash yet.
When you issue a receipt (or mark an invoice as paid), you move that amount from Accounts Receivable to Cash.
VAT & GST Deductions
In jurisdictions like the UK, EU, and Australia, a simple receipt (like a credit card slip) is often **insufficient** for claiming back VAT/GST on larger purchases. You generally need a full Tax Invoice that includes the seller's tax ID and a breakdown of the tax amount. Read our VAT Guide for more details.
Can an Invoice Be a Receipt? (The "Paid Invoice" Rule)
Many freelancers ask: "Do I really need to create two separate documents?"
The Shortcut: You can turn an Invoice into a Receipt by marking it as PAID. This is legally accepted as a receipt in most B2B jurisdictions.
If you use our Invoice Generator, you can achieve this easily:
- Create your standard invoice.
- In the totals section, enter the full amount in the "Deposit Paid" field.
- This will show "Balance Due: $0.00".
- Add a note in the Terms section: "PAID IN FULL via Bank Transfer on [Date]."
How to Create These Documents
Creating an Invoice
- Header & Branding
Clearly label as 'INVOICE'. Add your logo and business info.
- Unique Numbering
Assign a sequential Invoice # (e.g., INV-001) for audit trails.
- Party Details
Include full details for both Supplier and Customer (Name, Address, Tax ID).
- Payment Terms
State the Due Date (e.g., Net 30) and payment methods (IBAN/Stripe).
Creating a Receipt
- Clear Title
Label as 'RECEIPT' or 'PAYMENT CONFIRMATION'.
- Reference Original Invoice
Link it to the original Invoice # (e.g., 'Payment for Inv #001').
- Payment Evidence
List the Date Paid, Amount Paid, and Method (e.g., 'Paid via Visa ending 1234').
Frequently Asked Questions
What is the fundamental difference between an invoice and a receipt?
An invoice is a request for payment sent *before* money changes hands. A receipt is proof of payment issued *after* the transaction is complete. In accounting terms: Invoices track what is owed (Receivables), Receipts track what has been collected (Cash Flow).
Can an invoice serve as a receipt?
Technically, no, because they serve different timing functions. However, a 'Paid Invoice'—an invoice stamped or marked as 'PAID' with the date and method of payment—is legally accepted as a receipt in most B2B jurisdictions.
Are receipts required for tax deductions?
Yes. For expense claims and VAT/GST deductions, tax authorities (like the IRS, HMRC, or ATO) require proof of payment. A standard unpaid invoice proves an obligation, but a receipt (or paid invoice) proves the expense occurred.
What is a Proforma Invoice in this context?
A Proforma Invoice is a preliminary quote used to declare value (often for customs) before a sale. Unlike a standard invoice, it is not a demand for payment, and unlike a receipt, it does not prove payment.
Disclaimer: The information provided in this guide is for educational purposes only and does not constitute legal, accounting, or tax advice. Rules regarding invoices and receipts vary by country (e.g., IRS rules vs. HMRC rules). Always consult with a qualified CPA or tax professional for your specific business needs.