Glossary
What is a debit note?
Two everyday uses: a supplier raising an invoice it undercharged, and a buyer recording goods sent back.
Updated
In short
A debit note increases the value of an earlier invoice or, in purchasing, records goods returned to a supplier. In SimpleERP a purchase debit note returns stock to the supplier and is applied against their bills.
A debit note is a document that increases the value of an earlier invoice or, in purchasing, records goods returned to a supplier and the amount the supplier now owes back. In VAT and GST systems a supplier's debit note increases output tax, for example when it undercharged. In everyday practice, buyers also raise debit notes to record purchase returns and claims, while the supplier issues the matching credit note.
Debit note: a worked example
Harbour Steel Furniture finds dented sheets in a delivery from Atlas Steel Supply and sends back $1,200 worth, plus 20% tax. It raises a debit note against the bill:
| Account | Debit | Credit |
|---|---|---|
| Accounts payable: Atlas Steel Supply | $1,440 | |
| Inventory (steel sheets) | $1,200 | |
| Input tax 20% | $240 |
The amount owed to Atlas Steel Supply falls by $1,440. Atlas Steel Supply issues its own credit note, and Harbour Steel files it with the debit note as the record of the reversed input tax.
FAQ
Questions, answered
What is the difference between a debit note and a credit note?
In VAT and GST systems, a supplier issues a credit note to reduce an invoice and a debit note to increase it. In daily practice, a buyer's debit note records a purchase return or claim, and the supplier answers it with a credit note. Each side records the same event from its own view.
When does a supplier issue a debit note?
When the value or tax on an invoice was lower than it should have been, for example a price revision agreed after delivery or tax charged at the wrong rate. The debit note adds output tax and must refer to the original invoice.
Does a debit note affect the input tax I reclaim?
A supplier's debit note increases the tax the buyer can reclaim. A buyer's own debit note for a return does not change it by itself; the supplier's credit note does that, so the buyer reverses the input tax to match it.
Should I wait for the supplier's credit note before posting the return?
Post the return when the goods leave, so stock and the amount owed are right that day. Then check the supplier's credit note against your debit note when it arrives, and follow up if it does not arrive.
Related
Keep reading
Credit note
A document that reduces an earlier invoice, for returns or overcharges.
Read moreAccounts payable
Money owed to suppliers for goods and services received on credit.
Read moreTax invoice format
The fields a VAT, GST or sales tax invoice usually carries, how the tax lines are worked out, numbering rules, and a worked invoice to check yours against.
Read more
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