Debit note and credit note
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The information of such debit in the books of the purchaser must be communicated to the seller via proper document with full details of the reasons and the amount being debited. In other words it is an evidence for the occurrence of a reduction in expenses. If as a businessman, you order raw material of certain value but the material turns out to be of inferior quality that you do not like and return it back to the supplier, he is obliged to issue a credit note in your favor that automatically cancels the invoice raised by him for the returned raw material.
A Credit note can be issued by supplier of goods or services or both, to the recipient in following situations: i Excess price or tax charged from the recipient: Taxable value or tax charged in exceeds the taxable value or tax payable in respect of such supply, ii Goods returned: Goods supplied are returned by the recipient, iii Deficient Quality: Goods or Services or both supplied are found to be deficient. It can be compared to a negative invoice that has the ability to nullify the effects of an invoice. Signature or digital signature of the supplier or his authorized representative The details of debit notes have to be declared in the month following the month on which such debit note has been raised.
Date of issue of the document 6. The purchaser sends this document to the vendor and tells him that the debit has been made to his account by the purchaser. Debit note is a document issued by the purchaser of goods to the seller. The consecutive serial number which is a unique number for every financial year 5. The company on the receiving end of a memo can use it to track how much to adjust its account books. The debit note is prepared like the regular invoice; it mainly tells about the debit done in the account of the seller. Introduction Invoice is a document which provides evidence as to existence of transaction of sale or purchase of goods or the agreement of supply. Credit Note vs Debit Note If you have an account with a bank, you can see the entries in your passbook as either credit or debit. Meaning of tax invoice Tax Invoice shall be deemed to include a document issued by an Input Service Distributor and also include any supplementary or revised invoice issued by the supplier in respect of a supply made earlier. As in the books of the supplier, customer account has the debit balance and on accounting of debit note, customer account balance be will increase. How to create Credit Note or Debit Note You can easily create credit note in ProfitBooks from an invoice. In this article you can find all details related to Debit Note and Credit Note like Meaning or definition of debit note, when we issued debit note.
Difference Between Debit Note and Credit Note - Credit note can be sent by the seller when he has overcharged the buyer. Debit Note When goods are returned, the purchaser returning the goods prepares a memo with full particulars of the return and sends it to the supplier to whom the goods are returned.
Debit note and credit note are frequently used documents in any business and is of paramount importance for adjustments in the balances of debtors and creditors. In this article, I am going to discuss the meaning and uses of debit note and credit note. If not you can continue reading the post. Debit Note When goods are returned, the purchaser returning the goods prepares a memo with full debit note and credit note of the return and sends it to the supplier to whom the goods are returned. This memo is called the Debit Note. A Debit Note is also used by a Purchaser when he has been wrongly overcharged or when he claims an allowance for damaged goods from the supplier. Now let me ask you a question: Can you tell me why we call this document a Debit Note. debit note and credit note The logic is pretty basic. Consider a situation where Mr. P buys something from Mr. P will record the purchase in his books of accounts as follows: Purchase Account Dr Rs 1000 To Mr. S Debit note and credit note Rs 1000 So you can notice that when a purchase is made, the account of the supplier is credited in the books of the purchaser. In the above journal entry, the account of Mr. S Seller has been credited in the books of Mr. P Purchaser Now assume that goods worth Rs 400 out of the above were returned to Mr. The journal entry for the return in the books of Mr P would be: Mr. S Rs 1000 is reduced by Rs 400. Now to reflect this reduction in liability, Mr P has to reduce the credit balance in the account of Mr S in his books by debiting his account by Rs 400. The information of such debit in the books of the purchaser must be communicated to the seller via proper document with full details of the reasons and the amount being debited. This document is called the debit note. Format of a Debit Note I hope now you are aware of the concept of a Debit Note. So lets proceed with Credit note. Credit Note When goods sold are returned to a seller by his customer for some reason or the other, the memo issued by the seller to the customer acknowledging the receipt of the goods is called a Credit Note. The Whole Process of Debit and Credit Note From the above illustration you can have an idea of the whole process of the Debit Note and Credit Note cycle that takes place on the event of return of goods. Let us take the same example from above i. P buys something from Mr. Now we will consider the situation from the point of view of the seller. To Sales Account Rs 1000 From the above entry you can see that the account of the purchaser i. P now becomes the debtor of Mr. Now suppose Mr P returns goods worth Rs 400 to Mr S and sends a Debit Note with the returned goods. The entry for the return in the books of Mr S seller would be: Sales Return Account Dr Rs 400 To Mr P Account Rs 400 As soon as Mr S accepts the debit note sent by Mr P on debit note and credit note of the goods, he needs to reduce the debit balance of Mr P in his books as the amount of money receivable from Mr P is reduced by Rs 400. Thus he credits the account of Mr P in his books to adjust the debit balance in Mr P Account to make it equal to the amount receivable from him. The information of such credit in the books of the seller is communicated to the buyer along with the acceptance of return of the goods with the help of a proper document. This document is called the Credit Note. Credit note is nothing but an acceptance of the Debit note Format of a Credit Note From the above format of the Credit Note, you will notice that it is nothing but a mirror image of a Debit Note. So that was all about Debit Note and Credit Note. Video Tutorial in Hindi Below is a video on the same topic where the concept is explained in detail in Hindi. If you are conversant with the Hindi language then please consider watching it for a deeper understanding Liked the Video. Visit and our for more awesome stuff Thanks a lot for reading the post and watching the video. Please share your feedback via the comments and share the post.
