If you're a business owner or freelancer managing invoices, you’ve likely heard of credit notes and debit notes. But what are they exactly?
A credit note is a document issued by the seller to the buyer when the seller needs to reduce the amount payable on a previously issued invoice.
A debit note, on the other hand, is issued by the buyer or seller to increase the amount due for a transaction.
🟢 When to issue a Credit Note:
A client was charged ₹10,000, but ₹2,000 worth of items were returned. You issue a credit note for ₹2,000.
🔴 When to issue a Debit Note:
You sent an invoice for ₹15,000, but forgot to include delivery charges of ₹500. You issue a debit note for ₹500.
| Feature | Credit Note | Debit Note |
|---|---|---|
| Issued By | Seller | Buyer or Seller |
| Purpose | To reduce invoice amount | To increase invoice amount |
| Accounting Impact | Decreases accounts receivable | Increases accounts receivable/payable |
| Common Use Cases | Returns, discounts, overbilling | Extra charges, underbilling, price hike |
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