Future Business Leaders of America (FBLA) Accounting Practice Test

What type of invoice is used as a source document for recording a sale on account?

1. Sales Invoice

2. Purchase Invoice

3. Return Invoice

4. Service Invoice

The correct answer is: Sales Invoice

A sales invoice serves as the primary source document for documenting a sale made on credit or on account. This type of invoice details the transaction, providing essential information such as the date of sale, items sold, quantities, and the agreed-upon price. It effectively acts as proof of the sale and outlines that payment is expected at a future date, reflecting a customer's obligation to settle the outstanding balance. When a sale occurs on account, it signifies that the buyer does not pay immediately but will rather fulfill the payment at a later date, thus creating accounts receivable for the seller. The sales invoice records this transaction in the accounting system, enabling accurate tracking of revenues and the amounts owed by customers. In contrast, a purchase invoice refers to the documentation received from a supplier after acquiring goods or services, highlighting the costs incurred rather than sales made by the business. A return invoice specifically relates to situations where goods are returned, and adjustments are made to accounts, while a service invoice documents charges for services provided rather than goods sold. Therefore, when it comes to recording a sale on account, the sales invoice is the critical document that facilitates this process.