Debit Note and Credit Note

 Debit and credit notes are an important part of today’s business culture as corporations have grown large and so have their sales and purchases. Accounts payable management and accounts receivable management include dealing with credit and debit notes on a daily basis. Therefore, knowing the difference between a debit note and a credit note is important.

  

Debit Note

1. When a buyer returns goods to the seller, he sends a debit note as intimation to the seller of the amount and quantity being returned and requesting return of money.

2. A debit note is sent to inform about the debit made in the account of the seller along with the reasons mentioned in it.

3. The purchase returns book is updated on the basis of the debit note. (In case of return of goods)

4. It is often used to return goods on credit.

5. A debit note is generally prepared like a regular invoice and shows a positive amount.

6. A journal entry to record a debit note is

Sales Returns A/C	Debit
To Debtor’s A/C	Credit

Credit Note

1. When a Seller receives goods (returned) from the buyer, he prepares and sends a credit note as intimation to the buyer showing that the money for the related goods is being returned in the form of a credit note.

2. A credit note is sent to inform about the credit made in the account of the buyer along with the reasons mentioned in it.

3. The sales return book is updated on the basis of the credit note. (In case of return of goods)

4. It is generally sent by the seller if the goods are found incomplete, damaged or incorrect.

5. A credit note generally shows a negative amount.

6. A journal entry to record a credit note is

Creditor’s A/C	Debit
To Goods Returned A/C	Credit

Comparison Chart

BASIS FOR COMPARISON	DEBIT NOTE	CREDIT NOTE
Meaning	Debit Note is a document which reflects that a debit is made to the other party's account.	Credit Note is an instrument used to inform that the other party's account is credited in his books.
Use of	Blue Ink	Red Ink
Represents	Positive Amount	Negative Amount
Which book is updated on the basis of note?	Purchase Return Book	Sales Return Book
Effect	Minimization in account receivables.	Minimization in account payables.
Exchanged for	Credit Note	Debit Note