What is the primary function of applying a payment on an invoice?

The primary function of applying a payment on an invoice is to record the payment directly against that invoice, which updates the accounting records to reflect that the amount owed has been reduced or cleared. This action ensures that the accounts receivable are accurately maintained, showing that the customer has fulfilled their obligation for that specific invoice. When a payment is applied, it helps both the seller and customer track payment status and maintain clear financial records.

By recording the payment directly from the invoice, the associated transaction is documented with proper references, making it easier for both financial reporting and audit trails. It also facilitates financial management by accurately reflecting the cash flow in the books and ensuring that outstanding balances are effectively managed.