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Debit and credit notes are both formal accounting papers that are used by organisations for various purposes. These notes, which are separate from an invoice, inform customers of their existing company credit or, opposite, how much they still owe. They’re also important for tracking shipments, making payments, and seeing if there’s any credit left on the account.
Debit Note
A trading tool designed and issued by the buyer and delivered to the seller provides information regarding the amount deducted from the merchant account and the reasons for that are known as Debit Note. The document provides information to the seller that the debit has been made to his account in the buyer’s book. Reasons for withdrawals from the account are provided below:
- When a customer account is overcharged, you send a debit note to the merchant.
- When the buyer returns the goods purchased, he or she submits a debit order.
- When a consumer charges less than the seller’s account, he or she issues a debit order.
- The seller gives the buyer a credit note as well as a debit note. It is written in blue ink. Generally, a debit note reduces the receiver.
Credit Note
A modified and reissued memo, containing details of the amount credited to the consumer’s account and the reasons for this, is known as Credit Note. Issued in exchange for Debit Note. Provides information to the consumer; that account is listed in the dealer’s book. The note is prepared with red ink. The reasons for issuing a credit note are as follows:
- When a consumer overcharges a merchant account, he or she issues a credit note.
- When the supplier returns the goods and sells them to the buyer, then the credit card is issued.
- The consumer may also send a credit note, if the seller charges a small fee.
- The issue of the credit note indicates that the account balance has been reduced. Often, it indicates a negative value.
Difference between Debit Note and Credit Note
Debit Note | Credit Note |
The buyer prepares and sends it to the seller | The seller sends the note to the customer |
It is a note announcing the withdrawals made to the supplier’s statement | This note will ensure that the credit is credited to the buyer’s account |
Receive Account (AR) account dropped | Paid Account (AP) is declining |
The purchase return book is renewed | The sales return book is renewed |
The withdrawal note is exchanged for a credit note | The credit note is exchanged for a debit note |
It is credit to the consumer and is written in blue ink | Debit to seller and marked with red ink |
Debit note is issued when payment has already been made | A credit note is issued if the invoice is already enlarged |
Comparison Of Debit and Credit Note
A memo sent to one company to notify another party to be deducted from a merchant account, in a buyer’s account, is known as a Debit Note. A commercial document sent to another person to notify another that the credit has been made to the buyer’s account, in the seller’s books is known as the Credit Note.
Debit Note is written in green ink while the Credit Note is fixed in red ink.
Debit Note is issued in exchange for Credit Note.
Debit Note represents the positive amount and Credit Note corrects the lower amount.
Debit Note reduces receivables. On the other hand, Credit Note reduces payments.
On the basis of the Debit Note, the refund book is updated. In contrast, a sales return letter is updated with the help of a Credit Note.
Conclusion
Typically, the deduction is deducted when there is an external return (purchase return) while an internal credit note (sales refund) is issued. In practice, when the buyer returns the goods to the seller, the buyer will issue a withdrawal note and the other party will issue a credit note to obtain a withdrawal note. Therefore, they are two aspects of the same function.
