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Difference between debit note and credit note

Millions of buying and selling transactions take place in everyday life, just as returns are made by many customers, when they discover that the products are not up to their needs. Debit note and credit note are used while goods are returned between two companies. The debit note is issued by the buyer when returning the goods to the seller and the seller issues one Credit note to inform you that you have received the returned goods.

When the goods are returned to the seller or supplier, a debit note is issued indicating that the corresponding amount has been debited to your account. On the other hand, when a customer returns the goods, he is issued a credit indicating that his account has been credited with the amount indicated in the note. Here in the article in question we discussed the substantial differences between the debit note and the credit note, take a reading.

Comparative chart

Basis for comparison Debt note Credit note
Sense Debit Note A document that reflects that a charge is made to the other party's account. Credit memo a tool used to inform that the counterparty's account credited in its books.
Use of Blue ink Red ink
represents Positive amount Negative amount
Which book updated on the basis of the note? Buy the return book Withdrawal of sales
Effect Minimize customer credit. Account debt minimization.
Exchanged for Credit note Debit note

Definition of the debit note

A commercial tool created and released by the buyer and delivered to the seller providing details of the amount debited from the seller's account and the reasons why it is known as a debit note. The document provides information to the seller that a charge has been made to his account in the buyer's book. The reasons for charging the account are shown as below:

  • When the buyer's account overloaded, it sends a debit note to the seller.
  • When the buyer returns the goods purchased by him, he also delivers the debit note.
  • When the buyer collects the seller's account, he issues the debit note.

The seller issues a credit memo to the buyer in recognition of the debit memo. written in blue ink. In general, the debit note reduces the credits.

Difference between debit note and credit note

Definition of credit note

A note prepared and issued from one party to the other, containing the details of the amount credited to the buyer's account and the reasons why it was made, known as a credit note. It is issued in exchange for the debit note. Provides information to the buyer; this is the account credited in the seller's book. The note prepared with red ink. The reasons for issuing a credit memo are as follows:

  • When the buyer charges the seller's account, he issues the credit note.
  • When the supplier recovers the goods sold by him to the buyer, a credit note is also issued.
  • A buyer can also send a credit memo, in case the seller collects it.

Issuing credit memos shows that account debts are reduced. In general, it shows the negative amount.

Key differences between debit note and credit note

The following are the differences between a debit note and a credit note:

  1. A note sent by one party to inform the other party that the charge was made to the seller's account, in the buyer's books, known as a debit note. A commercial document that is sent by one of the parties to inform the other party that a credit has been made to the buyer's account, in the seller's books known as a credit memo.
  2. The debit note is written in blue ink while the credit note is prepared in red ink.
  3. Debit note is issued in exchange for a credit note.
  4. Debit memo represents a positive amount while the credit memo prepares a negative amount.
  5. Debit note reduces credits. On the other hand, the credit memo reduces your debts.
  6. On the basis of the debit note, the return book for purchases is updated. Conversely, the sales return book is updated with the help of a credit memo.

Conclusion

As a rule, a debit note is issued when a return is expected (return of purchase) while in the case of a return credit note (return of sale) it is issued. In a transaction, when the buyer returns the goods to the seller, the buyer will issue a debit note and the counterparty will issue a credit note in exchange for the debit note. So, they are the two aspects of the same transaction.