What are Credit notes?

Credit notes with an example would be helpful

3 Answer(s)


these are notes u put up regarding the your crediters


Credit Note is an accounting document that is generated to record any credit given to a Customer (or a Trade Debtor in other words). The credit is given to a customer for various reasons for e.g. damaged/faulty goods, over-pricing of items sold to him, selling at a price not agreed with him etc.

Since Trade Debtors normally have a debit balance because we sell goods to them which become a receivable until they are paid so if there is any reduction to this debit balance it will be through a credit isn't it. That's why when a Debtors' receivable balance is reduced for some reason (like the reasons that I mentioned above) we acknowledge that reduction through a Credit Note meaning we are confirming our Trade Debtor that will receivable or debit balance has been credited (or reduced) with the amount as per Credit Note.


@ ashwin : no ashwin a Credit Note has nothing to do with the Creditors. It has to do with our Debtors or with the people who owe us money for something like interest on loan that we have given.

Apart from Trade Debtors, Credit Notes can also be used for any transactions that involve Receivables of any sort. its main purpose is to reduce the amount receivable to us.

Also one last thing I would like to mention here is that when we are the customers ourselves then we would be receiving the credit note from the seller and we will be issuing then a Debit Note for the same.

Hope that helps. Do tell me if you need to know more.