A receipt is a written or electronic document stating something of value has been transferred from one party to another. It is not only issued to consumers from vendors and service providers. Business-to-business dealings and stock market transactions also use receipts. Receipts serve various purposes, including:
- Documenting ownership for insurance purposes
- Serving as proof of delivery from the supplier
- Showing proof of ownership
- Offering evidence that a sales tax was paid as part of the transaction
Receipts are generally automatically generated by sellers (ex. cash registers). Or, sellers may produce them manually under more informal or low-volume circumstances. Gross receipts, cash register tape receipts, invoices, and petty cash slips are various types of receipts.
What is a Receipt?
A receipt is a piece of paper or an electronic document confirming a seller received money from the purchaser. Usually, the date and a description of the item are listed. There is also a description of the item the buyer purchased. When transactions occur between two businesses, receipts contain information about the payment method and the buyer. Receipts are also necessary for tax purposes as proof of particular expenses.
What is the Importance of a Receipt?
Receipts offer information to customers or donors, document purchases, and assist with internal accounting. For-profit and nonprofit organizations have several reasons for giving patrons receipts.
Customer Information
Receipts include details about a customer’s purchase (including itemized products and services), unit prices, subtotals, taxes, and totals. They also note the purchase date, which is significant to business buyers since they use receipts to record transactions. Additionally, receipts state company policies and offer discounts for follow-up surveys.
Internal Accounting
Businesses keep copies of receipts for internal accounting. Since receipts enable businesses to track sales and revenue properly, whenever questions arise about details of a transaction, someone can resolve them. Usually, the company’s bookkeeping or accounting department can reference receipts. Also, receipts offer evidence of sales transactions for audits on tax returns and highlight any discounts on sales or allowances.
Returns and Exchanges
For return and exchange policies, receipts are a key part of the process. If a customer gets the wrong size in an outfit or a part that does not fit, they will typically show the retailer a receipt to return the item. Without a receipt, the customer may be able to exchange the item for a similarly priced one. Receipts also display important information such as how many days from the purchase date a customer has to return items.
Nonprofit Donations
Based on the IRS website, individuals or businesses wanting to claim cash or gift contributions to an IRS-recognized 501 (c)(3) nonprofit organization need receipts. For instance, people who donate items to Goodwill or the Salvation Army need a receipt to deduct the value of their contributions. The receipts aid in accurately entering charitable contributions when filing taxes and provide documentation of the contributions during an audit.
Where can you Get a Receipt?
You can get a receipt from a variety of places, including:
- Walmart
- Target
- Chase Bank
- Buffalo Wild Wings
- Red Lobster
Any grocery store, retailer, bank, or specialty store can give consumers receipts. The document serves as evidence of a transaction and allows customers to reference it in the future if necessary.
Who Makes the Receipt?
Businesses and self-employed individuals make receipts. You can use computers or pen and paper to make these documents.
To make a receipt, follow these steps:
- Select the word processor to use in creating the receipt. Receipt templates can be accessed on Microsoft Office by choosing to create a new document and then scrolling through options to find a desired one. After finding the template, you have to fill in the details.
- Create the receipt’s header, which should include a business’s name, its contact information, and the date and time of the relevant transaction. For example, if a proprietor sold books to a customer, they would have to include all of this data on the receipt before giving it to the customer.
- Describe the product that is sold in the transaction. Suppose a proprietor sold three books to its customer. That means the receipt should state each book’s name, the quantities sold of the product, and any other essential information.
- Elaborate on other details on the receipt. Things such as the price charged on the product and taxes charged on the sale deserve an explanation. Also, remember to list the total cost at the end.
Who is Authorized to Issue a Receipt?
Retailers, banks, and tax and financial services are businesses that are authorized to issue receipts. The receipts are an official record offering proof of a financial transaction between a customer and merchant. For instance, the holder of a futures contract usually receives a delivery instrument. It acts as a receipt since it can be exchanged for the underlying asset when the future contract expires.
What Is the Purpose of Issuing a Receipt?
Receipts are written or electronic documents stating something of value has been transferred from one party to another. It is an acknowledgment of a sale and protects customers and businesses in case of any problems or questions that arise in the future. Without receipts, there is no official way to prove that a transaction occurred somewhere.
What are the Benefits of Issuing a Receipt?
Receipts are beneficial concerning returns, exchanges, recommendations to improve the quality of a product, and giving each party ease of mind about what happened during a transaction. For instance, a customer may order a large coffee at a coffee shop, and ask for no sugar in it. However, if the customer tries their drink before leaving, they may realize it has sugar in it. They can use the receipt they received to request for someone to remake their coffee. This situation might be difficult to resolve with no receipt.
When do I Need To Provide Receipts?
You must provide a receipt whenever you are returning an item, exchanging something, or making a dispute. In these cases, you will need documentation to serve as evidence for whatever you need. In many instances, businesses denied a customer a return or exchange because they did not have a receipt or kept an item in their possession past the grace period. Ensure you are prepared for these situations by keeping store receipts for at least 30 days after buying them. You can save receipts for taxes and other financial purposes for a year or longer.
What are the Components of Receipt?
As previously mentioned, receipts are important for vendors since they show exactly how much is sold and what levels of inventory are needed. As for customers, these documents are crucial for tracking financial records.
The following are the most common components of receipts:
Business Name and Address
At the top of each cash receipt, you should see the name of the business that issued the receipt and its address. Sometimes, you may see the name near the bottom of the receipt, but the information should always be present somewhere on it. You need to have the business’s name and address noted so that you will know where to go if you have any issues with a transaction.
Price, Service, or Products
Cash receipts should state exactly what a customer bought and the price of that item beside it. This will likely take up a vast amount of room on the receipt. It is the most significant part because it allows the customer and vendor to reference exactly what was bought and sold, and correct any discrepancies.
Subtotal, Taxes, and Total
At the bottom of receipts, under the list and prices of goods purchased, there should be a subtotal category with an amount. The subtotal is the total of all goods purchased before taxes are applied. Under that section will be a taxes section. It will highlight the amount of tax charged on purchases. Then, under the taxes portion of the cash receipt, there should be a total section. It will provide the total amount, after taxes, charged to the customer. The customer will pay this amount.
Transaction Record
Under the section that reaches the total, there should be another that records how much the customer is paid. It should also state what change (if any) they received. This component of the receipt matters because it can be referenced if improper change was given to the customer. Transaction records should be included in this section as well so that vendors can reference the receipt number later if necessary.
What are the Different Types of Receipts?
The following are various types of receipts to maintain for financial records:
Gross Receipts
Gross receipts include the overall amounts your business or organization receives from all sources during its annual accounting period. This result comes without subtracting expenses or other deductible items. They can be used for business loans, personal income, and small business determination and qualifications.
Receipts from purchases and raw materials
These receipts state the amount paid and confirm that they were necessary business purchases. The documents should consist of canceled checks and other documents that identify the payee, amount, and proof of payment/electronic fund transfers.
Cash register tape receipts
Cash register tape receipts contain information that identifies a merchant. This data is typically at the top of a receipt and appears before anything else. Information such as the name of the merchant, business address, and phone number is provided for future reference. Generally, cash registers dispense these receipts.
Credit card receipts and statements
Credit card receipts and statements list all of the transactions made during one period. Banks send them out each billing period, which includes data on withdrawals and payments. This occurs for each billing period and consists of additional finance charges, along with explaining how much a borrower must pay and where to send the payment.
Invoices
Invoices can be developed by using invoicing software or drawn up by hand. Since prompt payments are an essential part of healthy cash flow, it is important to get the invoicing process correct at the beginning. An invoice is a demand for payment sent by a seller after the sale of goods and services is completed. But, it occurs before payment has been made. Invoices ensure that your business gets paid.
Petty cash slips
Petty cash slips make it easier to disburse money to employees for small expenses. Additionally, it provides a small reserve when you have to purchase supplies and similar items. While petty cash slips are usually small, the money you withdraw can add up over several months. And they are beneficial in helping you track how money is being used. Bookkeepers and custodians of petty cash are in charge of maintaining and issuing receipts for cash disbursement.
What is the Difference Between Receipt and Invoice?
There are several differences between invoices and receipts. The main distinction is the purpose of each document. Invoices are a request for payment, and sellers send them before payment. On the other hand, receipts provide proof of payment. Furthermore, you must include much more information on an invoice than a receipt. So, while invoices and receipts are related to the payments processes, they are separate documents with different uses.
Is a Receipt Required to Exchange or Return Items?
Receipts are required to exchange or return items. You have to provide proof showing that you purchased an item to receive a refund or exchange something. Moreover, try to remember how long you have had the item in your possession. Numerous stores have a 30-day policy for returning items. So even if you have a receipt, you will not be able to return the item since it is past the grace period.
Is it Mandatory for Businesses to Provide Receipts?
It is not mandatory for businesses to give consumers a receipt. However, it should be provided so that the consumer has a record of their transaction. If someone has to return to a store for any reason for a complaint or question but has no record, their situation is harder to resolve and prove. Receipts ensure that businesses and consumers are in agreement on an arrangement that occurred.
Why Should you Always Request a Receipt?
You should always request a receipt so that you have information on any transaction you had with a business. You may need to return to that establishment for a refund, to exchange an item, suggest an improvement, or inquire about something. The receipt will enable you to accurately and efficiently move through the process. Evidence of your payment and items will help businesses assist you with any problems.
Is it Necessary to Keep a Copy of all Receipts?
It is necessary to keep a copy of most receipts you receive. Suppose you buy a new shirt and a phone case one day. However, you realize that the shirt is too small. To return it, you will need to show proof that you purchased it, where the receipt comes into play. Generally, receipts for store items can be saved 30 days from the date of purchase. You can discard them after this period. But concerning taxes and other important financial documentation, it is crucial to keep these records. You will need them for the IRS and other business or financial operations.
Is a Receipt Required for Tax Purposes?
A receipt is not required, but it does help in tracking revenue, sales, and other significant information. It is beneficial to have written or digital evidence of your transactions. This data can be used for compiling statements and filing tax returns with the IRS.
The IRS has accepted scanned and digital receipts as valid documents for taxation since 1997. However, digital receipts must be accurate, easily stored, preserved, retrieved, and produced. Also, it is best to save them on the cloud, or somewhere they can be accessed easily if a hard drive fails.
