A commercial instrument made and issued by the purchaser and delivered to seller giving details regarding the amount debited from the seller’s account and the reasons for the same is known as Debit Note. The document provides information to the vendor that a debit has been made to his account in the buyer’s book. The reasons for debiting the account are given as under:
- When the buyer’s account is overcharged, he sends a debit note to seller.
- When the buyer returns the goods purchased by him, then also he delivers the debit note.
- When the buyer undercharges the seller’s account, then he issues debit 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|
|Who issues it?||The buyer of goods issues it.||The seller of goods issues it.|
|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||It can be issued only in the event of credit purchases from the buyer’s perspective.||It can be issued only in the event of credit sales.|
|Impact||It reduces account receivables in the books of sellers.||It reduces account payables in the books of the buyer.|
|Reflects||A debit note reflects a positive amount.||A credit note reflects 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||It is issued in blue ink.||It is issued in red ink.|