In accounting, what is the meaning of an invoice?

Introduction / Context:
Invoices are among the most basic and widely used documents in accounting and business transactions. Every sale of goods or services on credit or even for immediate payment typically involves an invoice. This question checks whether you know the standard definition of an invoice and can distinguish it from other financial documents like bank statements, balance sheets and internal budgets.

Given Data / Assumptions:
- The term being defined is invoice. - We are working in a general accounting and business context. - Options include descriptions of a bill sent by a seller, a bank statement, a list of assets and liabilities, and an internal budgeting document. - We must select the option that matches the commonly accepted meaning of invoice.

Concept / Approach:
An invoice is a commercial document issued by a seller to a buyer that specifies the goods or services supplied, the quantities, unit prices, total amount payable, terms of payment and sometimes tax details such as value added tax or goods and services tax. It serves as a request for payment and as evidence of a sale transaction. In accounting, invoices are source documents used to record revenue for the seller and a liability or expense for the buyer. A bank statement is a report from a bank, a list of assets and liabilities forms part of a balance sheet, and internal budgeting documents are used for planning, not for confirming external sales transactions. Therefore, only the option describing a bill from seller to buyer correctly captures the meaning of invoice.

Step-by-Step Solution:
Step 1: Recall typical elements on an invoice: seller details, buyer details, description of goods, quantities, prices, taxes and payment terms. Step 2: Compare each option with this mental image. The first option explicitly mentions a bill sent by a seller to a buyer and lists goods, quantities, prices and the amount due. Step 3: Notice that a bank statement contains transactions in a bank account, not details of specific sales by a business to its customers. Step 4: Recognise that a list of assets and liabilities describes a balance sheet, and that internal budget documents do not function as legal bills to customers.

Verification / Alternative Check:
Another quick verification is to think about what document a customer would receive after purchasing goods on credit. That document is an invoice, and it is used both for recording the purchase and for making payment. Textbooks and legal definitions also confirm that invoices are commercial bills evidencing a sale, not bank statements or planning documents.

Why Other Options Are Wrong:
Monthly statement from the bank: This is a bank statement which lists deposits, withdrawals and balances, but does not serve as a seller to buyer bill. List of all assets and liabilities: This is the structure of a balance sheet, not of an invoice. Document used only for internal budgeting: Budgets project future income and expenditure, while invoices record actual sales and are sent to customers as requests for payment.

Common Pitfalls:
Some learners confuse invoices with receipts. An invoice is issued before or at the time payment is requested, while a receipt is typically issued after payment has been received. Another pitfall is thinking that any document listing amounts is an invoice; in fact, the essential feature is that it is a seller to buyer bill that forms part of a legal commercial transaction.

Final Answer:
The correct option is A bill sent by a seller to a buyer listing goods supplied, quantities, prices and the amount due, because this statement precisely describes the purpose and content of an invoice in accounting.