CTN PRESS

CTN PRESS

NEWS & BLOGS EXCLUCIVELY FOR INFORMATION TO ENGINEERS & VALUERS COMMUNITY

DIFFERENCE BETWEEN DEBIT NOTE & CREDIT NOTE

DEBIT NOTE

A debit note, or a debit memo, is a document issued by a seller to a buyer to notify them of current debt obligations. You’ll commonly come across these notes in business-to-business transactions — for example, one business may supply another with goods or services before an official invoice is sent. The debit note ‘makes note’ of the transaction for documentation purposes.

Debit notes are also used in business-to-customer transactions, such as when a customer returns goods to a business received on credit. In this case, the buyer issues the debit note to the seller.

CREDIT NOTE

A memo prepared and issued by one party to the other party, containing the details of the amount credited to the buyer’s account and the reasons for so, is known as Credit Note. It is issued in exchange for the Debit Note. It gives the information to the buyer; that is account is credited in the vendor’s book. The note is prepared with red ink. The reasons for issuing a credit note is as under:

  • When the buyer overcharges the seller’s account, he issues the credit note.
  • When the supplier gets back the goods sold by him to the buyer, then also credit note is issued.
  • A buyer can also send credit note, in case the seller undercharges him.
Particulars Debit note Credit note
Issued by A debit note is issued by the customer or the buyer of the goods. A credit note is issued by the supplier or seller or the sales team responsible for the selling of the goods.
Meaning The buyer of goods issues a debit note to the seller to return the goods received due to quality issues or other reasons. A debit note contains the reason for the return of goods. The seller of goods issues a credit note to confirm that the purchase return is accepted.
Can be issued A debit note is issued by the customer or the buyer of the goods. A credit note is issued by the supplier or seller or the sales team responsible for the selling of the goods.
Impact It reduces account receivables in the books of sellers. It reduces account payables in the books of the buyer.
Reflects It reflects only a positive amount. It reflects only a negative amount.
Form It is another form of purchase return. It is another form of sales return.
Accounting It leads to updating purchase return books. It leads to updating of sales return books.
Entry Supplier Account Dr.
Purchase return Cr.
Sales return account Dr.
Customer Account Cr.
Issued in exchange of A debit note is issued in exchange for a credit note. A credit note is issued in exchange for a debit note.
Issued by a seller to the buyer The seller issues debit notes to the buyer if the buyer is undercharged or the seller has sent additional goods. The buyer issues a credit note as an acknowledgement of a debit note received.
Ink The color of ink used in a debit note is blue. The color of ink used in a credit note is red.
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