Dictionary / Draft
What does Draft mean in accounting?
Quick definition
Cash & bankingA written order by one party ordering a second party to pay a third party. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
You draw a collection draft on a Canadian sale
You run a cutting-tool shop. On March 6 you ship $5,160 of taps and dies to a customer in Montreal and invoice them. You also draw a sight draft: you (drawer) order the Canadian bank (drawee) to pay your bank (payee) $5,160 against the bill of lading. You send that paper and the shipping documents through your bank for collection. When the Canadian bank pays, checking rises $5,160 (minus any collection fee) and accounts receivable drops; apply the deposit to that customer's invoice instead of waiting for a customer check.
Draft status on an invoice is not this paper
On August 19 you start an $890 invoice at your floral shop to an events client for a Saturday wedding, then save it as Draft in QuickBooks Online because the extra aisle runners are not confirmed. That badge is a first-pass sales document, not a written order requiring a second party to pay a third. Leave it unsent. Do not record accounts receivable or expect a bank to present the invoice. If a customer or bank later sent a signed order naming a drawee and a payee, that later instrument would be the draft.
Why it matters
A draft is a written payment order with three roles: the drawer orders the drawee to pay the payee. You will not see this most months; it shows up when a supplier, customer, or bank presents collection paper, often on an import or export, instead of an ordinary invoice. A bill of exchange is the same family, and a cashier's check is the special case where the bank drafts on itself. Treat a first-pass invoice or an ACH pull as this instrument and you will look for negotiable paper that is not there, or you will post a real collection draft as if it were a regular bill.
Further reading
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What is Draft in bookkeeping?
A written order by one party ordering a second party to pay a third party.
When should I use Draft?
Use Draft when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Draft?
Draft is used for draft entries, while Daybook covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.