What is the difference between debit note and credit note?

Debit note issued at the  sales return  by the buyer to the seller and the Credit note issued at the  sales return  by the seller to the buyer. This is generally issued on Credit sales.

A debit note or debit memorandum (memo) is a commercial document issued by a buyer to a seller as a means of formally requesting a credit note. A seller might also issue a debit note instead of an invoice in order to adjust upwards the amount of an invoice already issued (as if the invoice is recorded in wrong value). Debit notes are generally used in business-to-business transactions. Such transactions often involve an extension of credit, meaning that a vendor would send a shipment of goods to a company before the goods have been paid for. Although real goods are changing hands, until an actual invoice is issued, real money is not. Rather, debits and credits are being logged in an accounting system to keep track of inventories shipped and payments owed.

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.

1. When a buyer returns goods to the seller, he sends a debit note as an 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

1. When a Seller receives goods (returned) from the buyer, he prepares and sends a credit note as an 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