What Is Debit Note and Credit Note – Complete Details

What is a debit note ?

Debit note is a document issued by the purchaser of goods to the seller.Usually it takes place in returning the goods that are purchased on credit basis.

Debit note consists of many details about the Goods returned. Like total number of quantity and price , any trade discounts , special discounts allowed at the time of purchase.

From accounting point of view Debit note indicates that the account of the party to whom it is being issued ,is debited in the books of the sender of debit note. Debit note is used for reducing the receivables that we have to get from any party like our debtors.

When Debit Note is issued ?

1.When a customer is overcharged by the vendor or his creditor then to give effect for the same in his books, customer will send the Debit note to vendor / creditor.

2.Customer sends a debit note when he returns the goods.

3.Seller will send a debit note when he undercharges the customer…

Accounting entries :

1.When a debit note is sent by a customer to his vendor returning the goods he has purchased from the vendor.

In the books of customer (purchaser) :

Supplier (creditor) A/c…………….Dr

To Purchase returns A/c.

In the books of vendor / supplier. :

Sales returns A/c …………….Dr

To Customer (Debtor) A/c.

Credit Note :

Credit note is a note sent by the seller / Supplier acknowledging that he has received the goods returned by the customer.

Credit note indicates that the account of the party to whom it is issued , is credited in the books of accounts of the party by whom it is issued.(Supplier).

When A Credit note is issued ?

1.When a seller overcharges the customer / buyer then he sends a credit note crediting the account of customer in his accounts.

2.When a customer is undercharged then he will send a credit note to the supplier crediting the account of supplier in his accounts.

3.On receiving the goods on sales returns Seller will issue a credit note to buyer.

Accounting entries :

Accounting treatment is as same as stated in above paragraph. But for better interpretation we can look into that from seller’s point of view.