Description
Challan
A delivery challan is sent with goods when they are transported for reasons other than an immediate sale. It serves as proof that items were dispatched and documents their movement.
When a challan is used:
- For repairs or job work: When goods are sent to a third party for processing or manufacturing.
- For internal transfers: When moving goods between different warehouses or branches of the same company.
- For approval or trial: When sending goods to a potential customer for inspection before the purchase is finalized.
- To send samples: When providing samples to potential customers or for quality testing.
Key features of a challan:
- No payment request: A challan does not include payment information or request payment.
- No transfer of ownership: It documents the movement of goods, but it does not transfer legal ownership.
- No tax information: Generally, it does not include tax details like GST, because a sale has not yet occurred.
- May be converted later: Once a sale is confirmed, a challan can be converted into a formal invoice.
Invoice
An invoice is a commercial and legal document issued by a seller to a buyer to request payment for goods or services that have been sold.
When an invoice is used:
- To record a sale: It is issued to the customer after a sales transaction is completed.
- To request payment: It is a formal request for the payment of goods or services provided.
- For accounting purposes: It is used to maintain accounting records and ensure tax compliance.
Key features of an invoice:
- Requests payment: It shows the amount due for the goods or services provided.
- Transfers ownership: It confirms that the sale has happened and transfers legal ownership to the buyer.
- Includes tax details: It includes all transaction details, including the item price, applicable taxes, and the total amount payable.
- Legal record: Invoices are a key document for accounting and tax purposes
