There are times in your business journey as an individual or a company or even as a consumer when you are bombarded with several terms and you are confused on what each of those terms mean and what exactly is being talked about. If you are facing a dilemma between terms like a proforma invoice, invoice, tax invoice and preliminary invoice and wish to understand their purpose and how they differ, then this article is just for you. In this article, we will be explaining these terms and the purpose of each of these invoices. We will then also compare them for you to understand their differences better.


Introduction

Before we look at what a proforma invoice, tax invoice or preliminary invoice is, we must take a look at what an invoice is. Also known as a standard invoice, an invoice is a simple document that has a detailed list of the goods and materials that are being sold and shipped. This document has all the related details of the sale like quantity, price, discount, quality and the terms of the sale and purchase if any. This document is prepared at the request of the buyer by the vendor. A proforma invoice is different from a standard invoice and has an altogether different purpose. In the following sections, we will be sharing with you more about proforma invoice and how it is different from standard and tax invoice.

Table Of Contents

In this article about the difference between proforma invoice and invoice, you can read about the following topics:

  • What is a proforma invoice?
  • What is the purpose of a proforma invoice?
  • What is the difference between a proforma invoice And an invoice?
  • Can payment be made on a proforma invoice?
  • What is a preliminary invoice?
  • Difference between proforma invoice and account sales
  • What is the difference between a proforma invoice and a tax invoice?
  • Conclusion

By the end of this article, you will be clear on the meaning of these terms and how they are different from each other.

What Is A Proforma Invoice?

To begin with, let us understand what exactly a proforma invoice is. Unlike an invoice, a proforma invoice is created before a sale is made. Also called a dummy invoice, a proforma invoice is prepared by the seller or exporter and is a kind of quote. The proforma invoice contains important details like

  • The quantity, type and other specifications of the product or service the buyer has requested for.
  • Estimated prices
  • The terms of the sale if any.
  • The possible shipping and delivery dates.

What Is The Purpose Of A Proforma Invoice?

A buyer asks for a proforma invoice, only when there is a serious interest in availing the services or goods enquired about. The request for a proforma invoice indicates the buyer’s commitment to making the purchase. The proforma invoice helps the buyer get all the required details and remove any doubt before making a purchase and finalising the deal.

What Is The Difference Between A Proforma Invoice And An Invoice?

In this section, we will take a look at the major differences between proforma invoice and invoice. The five major differences between an invoice and a proforma invoice are:

Proforma Invoice

Invoice

A document that is similar to the invoice but used only for providing information about the goods and services enquired about.

A formal document that contains details about a sale that has been made and contains information related to the quantity and price of the goods or services that have been provided.

The proforma invoice is a kind of quotation.

The invoice is a kind of bill.

The proforma invoice is issued before a sale is made, at the request of the buyer.

The invoice is issued when the purchase is finalised, right before the payment.

The purpose of the proforma invoice is to help the buyer in making decisions regarding the purchase.

The invoice is used to provide information to the buyer regarding the amount that is to be paid for the goods and services.

No entry is made in the accounts book on issuing a proforma invoice.

The issuing of an invoice has to register in the book of accounts. 

Can Payment Be Made On A Proforma Invoice?

Payments cannot be made on proforma invoices. This is because a proforma invoice is not a legally binding document and is also not numbered like an invoice.

What Is A Preliminary Invoice?

A preliminary invoice is a document that is provided to the buyer before the actual sale is made. This invoice can also be used for internal checking purposes within the organisation making the sale, before handing the same over to the buyer.

Difference Between Proforma Invoice And Account Sales

The two major differences between proforma invoices and account sales are:

Proforma Invoice

Account Sales

A Proforma invoice is a type of quotation.

The account sales is a statement that is given by the consignee to the consignor.

This document contains the commitment by the seller to provide the buyer with the mentioned goods and services at the date and price specified. 

This statement contains details like the particulars of the sold goods and services like price realised, expenses incurred, due commission and balance.

Difference Between A Proforma Invoice And A Tax invoice

The following are the differences between a proforma invoice and a tax invoice:

Proforma Invoice

Tax Invoice

The proforma invoice is a kind of quotation that indicates the estimated price and time for the sale of specific goods and services.

The amount of tax payable during transactions is indicated in the tax invoice.

All the other differences between a proforma invoice and a tax invoice are similar to that of an invoice and a proforma invoice.

Conclusion

As we conclude this article on different types of invoices and the differences between them, we hope this article would have helped you solve any doubts regarding the same and helped understand better these terms related to a business.

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