written by Khatabook | December 8, 2021

What is Cash Memo? See Cash Memo Template

All transactions in accounting are accurately documented as proof of the financial trail. A cash memo is a type of document used to document cash transactions between buyers and sellers. A seller creates a cash memo and hands it over to the buyer in the case of a cash sale. It is the official record of all-cash sales made by the firm. It is prepared with a duplicate copy since the buyer keeps the original while the seller keeps the duplicate. This aids the seller in compiling all of their cash sales, reconciliation, tax payments, analysis, inventory planning, and cash management. It can be considered as a cash equivalent of an invoice.

It is a non-negotiable commercial instrument that acts as proof of the purchase for both the seller and the buyer. Cash memos contain information on sales products such as the amount, quantity, and rate. The authorised person signs the cash memo to make it a genuine document that assists in settling disputes. The objective of a cash memo in business is to keep track of all products and services transactions. These transactions are then recorded in the book of accounts using cash memos. Therefore, let's know cash memo format and cash memo sample, among other relevant information. 

What is the Format of Cash Memo?

Cash Memo contains the following aspects:

  1. Name and address of the supplier- Act as proof that the supplier has initiated sales.
  2. Name and address of the buyer- Act as proof that the buyer has substantiated the transaction.
  3. Serial Number of Cash Memo- Acts as a trail to follow the sales made by the company and to fully record all transactions without missing any.
  4. Date of Cash Memo- Helps to track the transaction daily.
  5. Customer or Purchaser’s Order Number- Helps to track the number of transactions against a single buyer.
  6. Quantity of Goods- Keeps track of what's being sold and what's in stock
  7. Description of Goods- Tells the nature of goods.
  8. Rate of Goods- To calculate the actual sales value.
  9. Discount (if any)- Keeps track of the discount provided.
  10. Total Amount- The final amount the buyer gives for the goods should be written in figures and words.
  11. Tax Registration Number- It is written for the payment of tax.
  12. Duly Signed- The authorised person must duly sign the Cash Memo.
  13. Terms & Conditions (if any)- Is mentioned containing the rules and regulations of purchase.

Role of Cash Memo

Cash memos are distinct from invoices, which are also used to track sales transactions. The main distinction between a cash memo and an invoice is that a cash memo records only cash sales, whereas an invoice records only credit sales transactions. Cash memo is an important tool available for businesses to manage their funds and sales.

The business keeps a duplicate copy of the cash memo as documentation for all-cash sales. Cash memos are placed in the seller's cash book and prevent any uncertainty about cash transactions by recording all cash transactions in writing. The buyer will hand the document over to the accountant, who will generate a payment voucher and file it for recording. It will prohibit the buyer from paying for the same invoice twice.

It assists in maintaining a suitable amount of stock to enable uninterrupted sales by recording the number of things sold and assisting the business in determining the proper stock level. It aids management in various other areas, including tax payments, reconciliation, analysis, and cash management, to name a few.

Cash Memo Template

Cash Memo

ABC

No. xxx                                                Address of Seller                                        Date – xx/xx/xxxx

Buyer’s Name - 

Address - 

S. No.

Description of Goods

Quantity

Rate

Amount




 
 

 


 

 

Terms & Conditions (if any)

Also Read: OLTAS Challan – TDS Challan Status

Cash Memo Sample

Here are the examples of GST cash memo format:

Cash memo example 1 – Mr A visits the Nike showroom to buy some clothes and shoes for himself. He went to the showroom, and he bought 2 t-shirts worth 2000 each, 2 pairs of jeans worth 3000 each and 1 pair of shoes worth 5000. He got a discount of 10%, and the GST rate was 18%. The Cash Memo is as follows:

Cash Memo

Nike Mart

No. 215                                             1511 Sector 46, Gurgaon                     Date – 10/08/2021

Buyer’s Name – Mr A

Address – 2215 Sector 14, Gurgaon

S. No.

Description of Goods

Quantity

Rate

Amount

1.

2.

3.



 

Nike T-Shirt

Nike Jeans

Nike Shoes

 Total

 Less: Discount (10%)     

Net Discounted Price

 Add: GST (18%)

2

2

1



 

2000

3000

5000



 

Total

4000

6000

5000

15000

1500

13500

2430

15930

Terms & Conditions (if any)

Cash memo example 2 – Mr X went to buy a LED Television and a Microwave for his home. He went to an Electronics Showroom. He bought 1 Sony LED television costing 70000 rupees and 1 Samsung microwave costing 30000 rupees. He got a discount of 5%, and the GST rate was 28%. The cash memo for the same is as follows:

Cash Memo

Gada Electronics

No. 014                                              105 Andheri East, Mumbai                     Date – 18/05/2021

Buyer’s Name – Mr X

Address – Flat No. 15 Vasant Kunj Society, Andheri East, Mumbai

S. No.

Description of Goods

Quantity

Rate

Amount

1.

2.




 

Sony 55 inch LED television

Samsung Microwave

                          Total                     Less: Discount (5%)     

Net Discounted Price

                             Add: GST (28%)

1

1




 

70000

30000



 

Total

70000

30000

100000

5000

95000

26000

121600

Terms & Conditions (if any)

Advantages of Cash Memo

  1. Simple and Straightforward - Both the buyer and the seller find the cash memo to be extremely simple.  It's ideal for small enterprises that don't need complicated processes.
  2.  Legal Document - The cash memo can replace the invoice, which is a legal document that proves the sale and buying transaction. This document is critical in the event of a dispute since it proves the transaction took place.
  3. To support cash reconciliation - Cash received can be matched with the cash memo, making cash on hand reconciliation easier for accountants.
  4. Authenticated - It is authenticated since it always bears the signature of a responsible individual.
  5. Prevent fraud - The paper serves as proof of sale and a receipt for money received from the consumer. It prevents fraud if staff attempt to steal money, resulting in a day-to-day imbalance.
  6. Separate cash transaction and credit sale - By sorting the reference number of the cash memo that should be placed by order, the seller can distinguish between cash and credit sales.
  7. Good for Business - Cash memo transactions are better for the business's cash flow because the consumer pays cash for sale right away.
  8. No bad debts - There will be no bad debts to the business because credit transactions are not possible with a cash memo.

Disadvantages of Cash memo

  1. Not suitable for a big company - Because the procedure is manual, it isn't easy to operate in a large organisation with a high volume of daily transactions. They require accounting software assistance to generate official receipts or invoices.
  2. Easy manipulation - Because the cash memo is manually prepared, it is relatively easy for employees to falsify the document's details.
  3. No Credit - Customers and vendors may not always want to pay cash right away since they like some credit days.
  4. High Risk - Compared to bank transfers or credit cards, operating cash sales carry a very high risk. It encourages employees to commit fraud and steal money, which is rather easy to do.
  5. Manual Process Because this is a manual operation, a responsible person should be assigned to oversee these transactions, as the risk of handling cash transactions is higher.

Types of Cash Memo

Some of the basic cash memos which small businesses can use are as described below- 

  1. Standard Cash Memo - A typical cash memo is used as a basic cash receipt for cash transactions in any business in any industry. It contains all of the relevant information, such as the items, the amount due, taxes, etc. It serves as evidence for both parties in a transaction.
  2. Advanced/Specialised Cash Memo - A specialised or more thorough variant of a basic cash memo is an advanced cash memo. It may also include other information, such as the parties involved in the division of taxes among the several forms of GSTs that apply detailed product item information.
  3. Partial Cash Memo - It can also be generated when a transaction is partially paid for in cash and partially paid for with a bank account. In such circumstances, a cash memo can be traced back to the invoice, which includes all of the transaction's payment details.

Difference between Cash Memo and Invoice

Cash Memo- A cash Memo is a non-negotiable commercial instrument that indicates that the purchaser has paid cash for the items sold to them. It serves as proof of a cash transaction.

Invoice- An invoice is a non-negotiable document that shows the amount owed by the buyer to the seller. It is given to the customer by the seller for him to make a payment request for items sold or services supplied to him. It is used to keep track of the sale transaction daily. It usually has a unique identification called an invoice number that can be referenced both internally and externally. In a billing problem, an invoice usually includes contact information for the vendor or service provider.

A typical Invoice contains- Date of issue of invoice, invoice number, name & address of buyer and seller, discount (if any), quantity, the unit price of goods, the total amount due, and signature of the authorised person.

The difference between invoice and cash memo can be drawn clearly on the following grounds:

Invoice

Cash memo

An invoice is a document that indicates the amount owed for products sold or services done.

A cash memo is an instrument that indicates a cash payment was made for the merchandise.

An invoice is generated before a payment is made.

A cash memo is generated after the payment is completed.

For credit transactions, an invoice is issued as proof of the amount owed.

For cash transactions, a cash memo is supplied as verification of the amount received.

The invoice bears the seller's or his agent's signature.

The cash memo, on the other hand, bears the signature of the cashier.

Before payment, the seller issues an invoice to the buyer.

Cash memos are produced after a consumer pays cash for their purchase.

Revenue stamps are not required on invoices.

In the case of cash memos, affixing a revenue stamp on cash receipts of more than Rs. 500 is required.

Both an invoice and a cash memo are business vouchers that are raised at separate times. An invoice might be a sales invoice in the eyes of the seller or a purchase invoice in the eyes of the buyer. The seller can quickly determine which bills have been paid and which are still due using invoices. Cash Memo, on the other hand, is proof of the amount paid by the buyer. The vendor keeps a copy for future reference.

Also Read: Know the Benefits of Cash Receipts With Examples

Conclusion

On cash sales, a cash memo is a business voucher supplied by the seller. For day-to-day transactions, the method is straightforward and effective. It's a legal document, and all cash memo transactions are legitimate. It is evidence of a company's sales. Using a cash memo is appropriate for a small business. It serves as evidence for all monetary sales made by a company. It's similar to an invoice; however, it's only for cash sales. Since a Cash Memo is not a receipt, it does not require a revenue slip to be attached to it. Cash memos are often managed by accounting employees, who enter the information from the document into accounting software programs or spreadsheets. On the other hand, business owners may handle it if they have an accounting background and know-how to fill out the cash memo properly. For accounting purposes, cash memos are quite significant. 

We hope that this article has explained the cash memo bill format, examples of cash memo example, and other important points related to cash memos. For more information, subscribe to Khatabook.

FAQs

Q: Cash Memo is prepared by whom?

Ans:

It is the responsibility of the seller to prepare a Cash Memo.

Q: Is Cash Memo a source document?

Ans:

A cash memo is a source document in which cash sales or purchases are recorded.

Q: Is Cash Memo the same as an invoice?

Ans:

Cash Memo is equivalent to an Invoice but not an invoice, although it is a legal document.

Q: Is Cash Memo used only for cash sales?

Ans:

Yes, Cash Memo is used only for cash sales and not credit sales.

Q: Why is Cash Memo needed?

Ans:

It is evidence for the purchaser for goods purchased against cash, and for the seller, it is evidence of sales done in cash.

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