Meaning of Cash Memo
Cash memo is a document used for recording cash sales transaction that took place between buyer and seller. It serves as evidence for the payment received for cash sales made by business. A cash memo is prepared and handed over to the customer at the time of making cash purchases from business.
Duplicate copy of cash memo is maintained with the business as a proof for all-cash sales. Cash memo is entered in the seller’s cash book and avoids any confusion of cash transactions as it records in written all cash entries.
Different details relating to sales items like amount, quantity and rate are included in cash memos. Cash memo is signed by the authorized person to make it authenticate document which helps in resolving disputes.
Role of Cash Memo
Cash memo is different form Invoice which is also used from recording sales transactions. The basic difference between cash memo and invoice is that cash memo records only sales that took place in cash whereas the invoice is a document which records only credit sales transactions.
Invoice is issued to purchaser by seller prior to the payment and cash memos are issued at the time of cash payment by a customer while purchasing. Issuance of invoices results in a creditor-debtor relationship but cash memo does not create such a relationship.
There is a requirement to affix revenue stamp with cash receipts of more than Rs. 500 in case of cash memo, but invoices do not require any revenue stamp. Cash memo is an important tool available with businesses to manage their funds and sales.
It helps to maintain an appropriate amount of stock to ensure uninterrupted sales as it records the number of items sold which will helps the business in deciding optimum stock accordingly. It assists management in different other areas like tax payments, reconciliation, analysis, cash management etc.
Cash memo Format/Contents
- Supplier’s name and address.
- Purchaser’s name and address.
- Serial No. and Date of cash memo.
- Description of goods.
- Quantity and rate of goods.
- Total amount.
- Discounts (Both trade and cash discount to be shown separately).
- Sales tax and Service tax number of supplier selling goods.
- Must be signed by authorized person.
- Area of jurisdiction must be written