What is the different between Credit note and Debit note?

Knowledge about credit and debit notes relevance as vouchers and purchases process

1 Answer(s)


Debit notes are generally used in business-to-business transactions. Such transactions often involve an extension of credit, meaning that a vendor would send a shipment of goods to a company before the goods have been paid for. Although real goods are changing hands, until an actual invoice is issued, real money is not. Rather, debits and credits are being logged in an accounting system to keep track of inventories shipped and payments owed.
It is a document used by a purchaser to inform a vendor of the quantity and amount of goods being returned, and requesting that the amount be returned to the purchaser. A debit note is often used to return goods on credit.
Also known as a "debit memo"
When the purchaser returns the goods to the seller the Purchaser sends a Debit Note to the seller (ie. the purchaser debits the seller in his books ie. Purchasers Books) and the Seller sends a Credit Note to the purchaser (ie. the seller credits the Purchaser in his Books ie. Sellers Books).
Following are the enteries made :-
Sales Return inward A/c Dr.
To Debtor A/c (Being goods returned by the customer)
Creditor A/c Dr.
To Goods Return A/c (Being goods sent back to the seller)

Credit Note cancels a whole or part of an invoice, either because the invoice itself was incorrect or there was a problem with the goods / services that were being invoiced for.
It is a note sent by one party to another informing him that his account is credited in the senders book. It gives the details as to why the party is credited and the amount of the credit.
Credit note is sent by the seller when he has overcharged the buyer or when he receives back the goods. It is sent by the buyer when he has been undercharged.

Also known as a "credit memo"