E T B I C MBA AGU

close similarities among the following terms.

what is the different between invoice , debit/credit note , promissory note, bill of exchange , cash memo when vendor and customer are dealing ?

note ( I have read it many times but it isn't clear for me if you kindly help me )

asked Oct 8, 2014 in Terminology in Accounts by rahimdad (60 points) 105 views

1 Answer

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Invoice: A document prepared by a seller at the time of making sale wherein the quantity, units sold, price per unit,  any deductions made and the total amount payable by buyer and also the terms of payment are mentioned.  Actually it is bill which is mostly against credut sakes,

Cash Memo is a bill issued by a seller  against Cash sales..

Voucher: It is a written document which supports the transaction.  Invoice, challan and transport receipt are some examples of voucher. (The literal meaning of the word 'vouch' is to confirm or to verify.  So any document which gives proof of a transaction is a voucher.  For example the Bill or Invoice you receive from the shopkeeper against purchase of a shirt is a voucher because that bill gives proof that you actually bought the shirt at a given price from a particular seller).

Debit Note: When goods bought on credit are returned to the seller due to various reasons like, defective goods received or goods extra supplied etc, we issue a Debit Note to the seller.  This Debit Note contains all the details of the goods returned and the name of seller etc.  The Debit Note is used as a source document for recording Purchase Returns and debiting seller’s account.

Credit Note: Similar to Debit Note mentioned above when our customers return goods to us, we issue them a Credit Note with the amount of Sales Return.  This Credit Note is used as a source document to debit the sales return account and credit the customer who returned goods. 

Bill of Exchange: According to the Negotiable Instruments Act 1881, a bill of exchange is defined as an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument. ( if I lend you some money and prepare a note ordering you to make payment to me after agreed time. You sign over it and return to me, it will be called a bill of exchange).

Promissory Note: According to the Negotiable Instruments Act 1881, a promissory note is defined as an instrument in writing (not being a bank note or a currency note), containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to or to the order of a certain person, or to the bearer of the instrument. (Taking the above example instead of my making a note, if you make a note promising to pay me money after agreed time, it will be called a promissory note).

answered Oct 9, 2014 by jbsclasses (3,967 points)
edited Oct 9, 2014 by jbsclasses
i really appreciate your high skill knowledge dear mr jag sharma and tnx alot for removing my doubt
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