Generally, a debit note is issued when there is a return outward/ purchase return while in the case of return inward/ sales return credit note is issued. In a transaction, when the buyer returns the goods to the seller, the buyer will issue a debit note and the reversed party will issue a credit note in exchange for the debit note. Hence, they are the two prospects of the same transaction.
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A debit note is known as a debit demo, and it is a document that is issued from a buyer to a seller pointing a request to return funds as a result of incorrect or damaged services, goods, or cancelation of purchase.
A debit note is also issued to the seller or the supplier of the goods by the buyer or the customer for informing about returning the goods received by the latter due to the defect and disparity present in the same.
The debit note is also updated with the reason behind the return of goods.
The credit note is also known as a credit demo. It is a document that the seller issues to indicate a complete or incomplete funds return.
It may get up in the event of an incorrect or damaged supply of goods, cancelation of an invoice error, or a purchase. However, it is normally raised in response to a debit note from a customer. The customer or purchaser can also use this document against a future order.
The credit note is a type of sales return that is issued to the buyer or the customers of the goods by the seller or the supplier of the same, and it informs that the purchase returns are accepted.
|Basis of Comparison||Credit Note||Debit Note|
|Issued by||The credit note is issued by the seller to the buyer showing goods return are accepted.||While the debit note is issued by the buyer or the customer of the goods.|
|Possible effect||Credit notes reduce accounts receivables.||Debit notes reduce accounts payables.|
|Used of color ink||The ink color used in a credit note is red.||The ink color used in a debit note is blue.|
|Reflect||credit reflects only a negative amount.||Debit reflects only a positive amount.|
|Updated book||The sale return book is updated||Purchase return book is updated|
|Exchanged against||Credit notes are also issued in exchange for debit notes.||Debit notes are issued in exchange for credit notes.|
|Buyer to seller||The Credit notes are issued when the seller or the supplier undercharges or has delivered additional goods.||Debit notes are issued when a customer or buyer returns the goods to the supplier or the seller.|
|Seller to buyer||Credit notes are issued when the seller or supplier acknowledges the debit note.||While debit notes are issued when the buyer or customer returns/ cancels goods purchased.|
|Another form||Another form of the credit note is the sales return of goods.||Another form of debit note is the purchase return of goods.|
|Result||Sale accounts are reduced||Purchase account is reduced|
|Issued to||The credit note is issued to the customer or the buyer of the goods.||The debit note is issued to the supplier or the seller of the goods.|
The credit and debit note records have to be retained until the expiry date of seventy-two months and from the due date of furnishing of annual return for the year regarding such records and accounts.
Such documents and accounts are maintained manually however they should be kept at every business or related place mentioned in the registration certificate. They shall be available at the related area of the business or a company where such accounts and documents are digitally maintained.
Company C is the purchaser, and Company D is the seller or supplier. The sequence of events below will lead to issuing a debit note.
Company C is the purchaser, and Company D is the supplier. Company C places Rs.10000 worth of orders from Company D. After sampling the delivered goods; company C informs company D about the low quality of goods detected in the sample. While company D verifies the sampled items to confirm the issues and faults a credit note opposition of the original invoice for the amount mutually decided on.
In real cases, the original invoice can be canceled in opposition to the credit note issued, and also an invoice corrected can be raised.
This credit note also may be used by Company C for further purchases from company D in the future, and the refund of the amount may also be agreed.
being made to the seller’s account in the buyer’s books is known as Debit Note.
While a commercial document that is sent by one party to inform the other party that a credit has been made to the buyer’s account in the seller’s books is known as Credit Note
This article gives a detailed difference between debit and credit notes. Here we also discussed the debit note and credit note key differences, examples, and also comparison table.