A Credit Note is a document issued by a seller to a buyer to formally acknowledge a credit adjustment for goods returned, overcharged invoices, or other reconciliation reasons. It reduces the amount payable by the buyer to the seller.
Key Features:
- Issued by: Seller to Buyer.
- Purpose: To notify the buyer of a credit made in their account.
- Usage Scenarios:
- Acceptance of returned goods.
- Overcharging on the original invoice.
- Incentives, discounts, or price adjustments post-invoice issuance.
- Accounting Impact: The seller credits the buyer’s account, reducing receivables or increasing payables.
Example:
A supplier sells goods worth ₹1,000 but later offers a ₹200 discount. The supplier issues a credit note for ₹200 to the buyer.