What are Debit Notes & Credit Notes
Debit Note and Credit note is quintessential of business practices daily. From small to large organizations, businesses transaction does not only include buying and selling activities. Businesses have to take into consideration of sales return and purchase return from their customers.
Therefore, it’s crucial to know the difference between a debit note and a credit note so businesses can issue the right note under the right circumstances.
What is a Debit Note?
So, what is a debit note?
A debit note can be defined as a commercial instrument issued by the buyer to the seller to request for refunds.
If you’re the customer or a supplier buying from another supplier, you can issue a debit note if you would like to claims back the credits by returning the goods to the seller.
There are various scenarios to apply a debit note, such as:
- The goods received are broken/faulty/damaged.
- The buyer wants to cancel the purchase order.
- The buyer is overcharged.
- Incorrect invoice value (Additional goods being delivered, but charged at lesser value)
Once the seller has received the debit note from the buyer, the seller will issue a credit note to the buyer to acknowledge the Debit Note received.
What is a Credit Note?
A credit note can also be known as a credit memorandum. A credit memorandum is a commercial instrument issued by the seller to the buyer to notify the buyer that a credit has been applied to the buyer for various reasons.
A credit note is commonly used for scenarios, such as:
- Buyer return goods if they received faulty, damaged, or incorrect goods.
- You are performing a refund for the customer who is not satisfied with your service.
- Buyer overpaid for the goods they’ve purchased.
- Seller overcharged the customers.
The key differences between Debit Note and Credit Note
Although Credit Note and Debit Note might sound similar to you, they are not the same. Here are some distinct differences between a credit note and debit note that you can note of:
- Debit Note is issued by the buyer to the seller to inform the seller that a debit has been made to the seller account in the buyer’s books. On the other hand, a credit note is issued by the seller to the buyer that a credit has been made to the buyer account in the seller’s books.
- Debit Note is usually marked in blue ink representing a positive amount, whereas the Credit Note is marked in red ink representing a negative amount.
- Issuing a Debit Note will affect the Purchase Return Book whereas the Credit Note will affect the Sales Return Book.
- Debit Note will minimize the account receivable, and the Credit Note will reduce the account payable.
Issuing your Credit and Debit Note on Deskera Books
Creating both credit and debit notes does not have to be complicated. Here on Deskera Books, we allow businesses to apply the debit and credit note directly to the Sales and Bill invoices conveniently. It’s hassle-free and intuitive!
Visit Deskera Books to find out more.
