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- The invoice price is the actual price that the end-customer retailer pays to the manufacturer or distributor for a product. However, in many industries, the "invoice cost" actually varies from the "net purchase cost," or the actual price of a product. The invoice cost of a product is the price that the merchant pays for the product before marking it up to sell. The invoice cost is sometimes used in industries such as automobile sales to entice customers to buy. The net purchase cost of a product is the amount of the invoice plus any additional fees and taxes that are incurred. Business owners can negotiate the purchase price of a product if they know what the net purchase price is in comparison to the invoice price. This is not always easy to do, but it should be apparent, at least following the first purchase of a product. Any fees or taxes added to the invoice price indicate the additional fees that are being tacked on to the price. If purchasing a product in a large volume, it may be possible for the manufacturer to waive some of these costs for a large enough order. If a car dealer has additional incentives available for the purchase of a vehicle, he generally discounts the vehicle below the invoice price. This should be seen as a sign for the buyer that additional room for negotiation may exist. Different methods exist in accounting for recording the purchase of a product bought at the invoice price. One method, the gross method, involves simply recording the full amount of the invoice as a debit to accounts payable and a corresponding credit to cash. If any discounts are given, they are itemized as a separate credit to cash, plus the purchase price. The net method, on the other hand, begins with the purchase price, including any discounts, which are then debited to purchases in the accounting ledger. A corresponding credit is then made to accounts payable. (en)
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