Pro-Forma Invoice
Categories: Accounting
A typical invoice lays out what someone owes. Like...you buy 1,000 pounds of turnips for the vat of turnip soup you're preparing for your family reunion. The invoice lists 1,000 pounds at $1.30 a pound...so you owe $1,300.
A pro forma invoice works more like an estimate. It doesn't provide a detailed account of what you owe. It shows what you would owe if you agreed to the deal.
When you go to the turnip distributor to pick up the supplies for this year's reunion, you ask them to put together a pro forma invoice for next year. They list 1,000 pounds of turnips, this time at $1.35 a pound, set for delivery one year from now. It provides a quotation for an upcoming sale, rather than a document detailing an already-completed one.
