What are Debit, Credit Note and their Formats?
You might be well aware of the term
statement or bill or bill of materials. An invoice is used to maintain a record
of sales. So, what happens when there is a change in the value of those
invoices. Will you go about editing those invoices? It does not make sense to
do so. You have already generated the invoice and recorded those transactions
in the journal.
The only way out is to make
additional entries that indicate a change in the original invoice value and
provide a document for further proof of the actual value of the sale made.
These documents are called credit and debit notes.
In the sections that follow, we
shall understand what debit note and credit is. We would also learn what should
be mentioned within the debit note and credit note and what should be the
format of a debit or credit note? Glance through a few examples of debit notes
and credit notes.
Debit Note And Credit Note Explained
What is a debit note?
A debit note is also known as a
debit memo. It is a document that is issued from a buyer to a seller indicating
a request to return funds as a result of incorrect or damaged goods or services
or cancellation of purchase. A debit note is issued before a credit note can be
issued by the supplier and acts as a buyer’s formal request to issue a credit
note.
A debit note can be issued by a
buyer to the seller requesting the return of the partial or whole amount of
payment already made. It could be due to incorrect or damaged goods received or
cancellation of the order, or other special circumstances. A debit note serves
as evidence of a purchase return in the buyer’s accounting books. On the other
hand, a credit note is proof of a sales return.
It is issued when, as a Client ,
you receive goods or services that may not be of expected standard while you
are in receipt of the final invoice from the seller. As a buyer of goods from a
supplier, if you would like to return the purchased goods for any valid reason,
you can issue a debit note.
Some common reasons for issuing debit notes:
1. Damaged or Imperfect
goods received.
2. The
purchaser has overbilled the invoice.
3. Incorrect invoice amount
Let’s look at a debit note example.
Company A is the purchaser, and
Company B is the seller or supplier. The sequence of events below will lead to
the issuance of a debit note...
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