What is a Receipt? Meaning and Examples

A key part of running your own business is keeping a record of any and all sales you've made. Receipts provide proof that the goods or services you provide have been exchanged for money. Without receipts, you run the risk of the buyer, seller, and your business being unable to prove that a transaction took place.

In this article, you will learn what a receipt is, why proof of payment is necessary, and what a receipt looks like as well as how to make one.

What Is A Receipt?

A sales receipt acts as a record of a transaction for both a seller and a buyer. A seller will issue a receipt when a sale is made to verify the amount paid by the buyer for the provided product or service.

Businesses often use receipts for inventory management and tax calculations, such as payroll or corporate income taxes. Customers may use them for accounting purposes or if they need to be reimbursed. 

Just as consumers receive receipts from service providers or suppliers, businesses value receipts in business-to-business dealings and stock exchange transactions. 

For example, if a business holds a contract they might receive a delivery instrument that acts as a receipt for that contract. When the contract expires, this delivery instrument acts as a receipt that the business can exchange for the underlying asset.

What are the Contents of a Receipt?

A receipt will often include the following: 

• The date of the transfer 
• A description of the product or service received 
• The cost of goods sold 
• Amount of sales tax charged, if any, as part of the transfer
• The payment method used, like credit card or cash

Why Should You Issue Receipts?

Receipts are important for both the buyer and the seller because they can be used to: 

• Document that the item now belongs to the buyer 
• Give the buyer proof that they made a full or partial payment 
• Serves as documentation of ownership for insurance purposes. 
• Provides evidence that the buyer is not liable to pay sales tax if it was already paid as part of the transaction 
• Can be used to record an underlying transaction as a basis for an accounting entry 
• Can be used as proof of delivery from the supplier if the goods are returned under warranty 

The seller will typically generate a receipt automatically via a cash register, however, there are some instances in which the seller will manually produce a receipt instead.

Types of Receipts 

Though there are several types of receipts, whether physical or digital, all sales receipts fulfill the same purpose. The different receipt types are:

Cash Register Receipts 

A cash register receipt is a printed slip of paper usually received after making a purchase. You may recognise this type of slip from your regular grocery store purchases.

Handwritten Receipts 

Some service providers, typically outside the retail environment, may provide this type of receipt. For example, an electrician may provide you with a handwritten receipt after fixing some wiring/plug outlets in your house.

Packing Slips 

Online retailers will often send out both an email receipt and a packing slip. The packing slip will contain additional information like the returns policy and you'll typically find it in the package you've ordered.

Carbon Copies 

This receipt is created alongside the handwritten receipt. Receipt notebooks have a carbon layer behind every receipt page, allowing the receipt to be traced onto the layer underneath for the seller to keep. 

Receipts are necessary so businesses have documentation of certain expenses. Which is why certain types of receipts can be generated for small businesses to retain so they can keep track of their operations.

These types of receipts include: 

• Gross receipts, like cash register tapes, receipt books, deposit information (including credit and cash sales), and invoices 
• Receipts from raw materials and purchases. These should confirm whether they were necessary business purchases and the amounts spent on those purchases. This documentation may include the identity of the payee, the amount paid, cancelled checks, if any, and proof of payment or electronic fund transfers.
• Credit card statements and receipts 
• Cash register tape receipts 
• Petty cash slips for any small cash payments 
• Invoices 

Example of a Receipt 

Below is an example of how a sales receipt will typically look. All receipts, regardless of the type, should detail the provided product, the total amounts paid and the date of payment.

Why Receipts Are Important 

Receipts are an essential part of maintaining complete and accurate record keeping for all businesses. Receipts allow businesses to keep track of all expenses and can be used as necessary documentation for tax audits. 

A record of past business expenses can also help companies plan for the future and create budgets based on past expenses. This is important for all businesses but is particularly useful for small and medium-sized enterprises (SMEs) who are trying to find their way in the market.

With QuickBooks Online's app integrations, with apps like Receipt Bank and Auto Entry, you can stay on top of your expense management.

Accurate record keeping allows you to track your company's financial performance, create financial statements with ease, record deductible business expenses, and prepare tax returns. 

Grow Your Business With QuickBooks Intuit! 

Did you find this article helpful? You can find many more informative articles on the QuickBooks Resource Centre. Check out other articles similar to this one, like the differences between a receipt and an invoice. 

QuickBooks' main aim is to help small businesses grow with the use our software, including our cloud accounting software. So you can manage your finances on the go, we've even created a mobile accounting app. Install QuickBooks Online today to make managing your business that much easier.