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| Corporate Practice bd |
What is debit note and credit note with example
Debit Note:
A debit note is a document issued by a buyer to a seller, indicating that the buyer is returning goods received on credit or that there was an error in the invoice issued by the seller. It serves as a formal request for a reduction in the amount payable to the seller.
Example of Debit Note:
Scenario: A company, ABC Ltd, receives 100 units of a product from a supplier, XYZ Ltd. Upon inspection, ABC Ltd finds that 10 units are damaged.
Debit Note Issuance: ABC Ltd issues a debit note to XYZ Ltd for the value of the 10 damaged units.
Details: If each unit costs $50, the debit note will be for $500 (10 units x $50 each).
Format:
ABC Ltd (Buyer)
Address: 123 Main Street, City
Debit Note No: 001
Date: 1st July 2024
To: XYZ Ltd (Seller)
Address: 456 Market Road, City
Description: Return of 10 damaged units
Product: Product Name
Quantity: 10 units
Unit Price: $50
Total Amount: $500
Reason: Goods damaged upon receipt
Please adjust the amount against our account.
Thank you.
Sincerely,
[Signature]
ABC Ltd
Credit Note:
A credit note is a document issued by a seller to a buyer, acknowledging that the seller has received a return of goods from the buyer or there was an overcharge in the original invoice. It serves as a confirmation of a reduction in the amount receivable from the buyer.
Example of Credit Note:
Scenario: A supplier, XYZ Ltd, realizes that they overcharged ABC Ltd by $200 on an invoice.
Credit Note Issuance: XYZ Ltd issues a credit note to ABC Ltd for the overcharged amount.
Details: The credit note will be for $200.
Format:
XYZ Ltd (Seller)
Address: 456 Market Road, City
Credit Note No: 002
Date: 2nd July 2024
To: ABC Ltd (Buyer)
Address: 123 Main Street, City
Description: Correction of overcharge on Invoice No: 1234Amount Overcharged: $200,Please deduct this amount from our outstanding invoice.
Sincerely,
[Signature]
XYZ Ltd
Differences Between Debit Note and Credit Note:
Purpose:
Debit Note:
Issued by the buyer to the seller to indicate a return of goods or an error that decreases the amount payable.
Credit Note: Issued by the seller to the buyer to acknowledge a return of goods or an overcharge, reducing the amount receivable.
Initiated By:
Debit Note: Buyer
Credit Note: Seller
Effect on Accounts:
Debit Note: Decreases the buyer’s payable amount and the seller’s receivable amount.
Credit Note: Decreases the seller’s receivable amount and the buyer’s payable amount.
Usage:
Debit Note: Used when goods are returned, or there is a discrepancy in the received quantity or quality.
Credit Note: Used when acknowledging the return of goods or correcting an overcharge.