A general invoice definition: An invoice is a record of purchase which shows a customer how much he owes. The intent of an invoice is to provide a legal record of a transaction between seller and buyer and, on the part of a seller, to prompt payment.
Every invoice, then, needs to contain certain basic information:
- The name of the seller
- The name of the purchaser
- The date of the transaction
- A description of the goods and/or services purchased
- The price of the goods and/or services
- The amount of tax on the transaction, if any
The Canadian tax system imposes further requirements on invoices. If you, as a seller, are charging GST (Goods and Services Tax) or HST (Harmonized Sales Tax) then in addition to the information listed above, you must also include on your invoice:
- Your Business Number (also known as the GST Registration Number);
- the terms of payment;
- an indication of items subject to GST at 5% or HST at the appropriate provincial rate, or that the items are exempt, and either the total amount of GST/HST charged, or a statement that the GST/HST is included and the total rate of tax;
- if applicable, an indication of items subject to PST (also known as RST) at the provincial rate, or that the items are exempt, and either the total amount of PST charged, or a statement that the PST is included and the total rate of tax.
- (Source: The Canada Revenue Agency, RC4070 - Guide for Canadian Small Businesses).
My How to Invoice article provides links to invoice templates for four different tax situations, including an invoice template for Small Suppliers (businesses that do not have to charge GST/HST) and one for service businesses.
Invoices, it should be noted, can also be used as sales tools. See Use Promos With Invoices for more on this.