What is Performa Invoice?

When goods are sent to the consignee, usually a statement showing the value of the goods is sent to the agent is known as proforma invoice. The agent is not liable to pay the amount stated in the statement since he has not purchased the goods. The statement is meant only for his information. It is drawn up in the form of an invoice, therefore, it is called proforma invoice, i.e. invoice for the sake of forma. The agent consignor as advance this may be done by cheque or by accepting a bill of exchange drawn by the consignor. Thus, a proforma invoice includes information about actual cost and expenses incurred by the consignor. It is inflated so that the consignee may not know the actual cost of goods. Hence in proforma invoices is included some percentage of profit.