Betty Bookkeeper explains when a business should issue a debit note vs a credit note – Oct 2015

Hi Betty 

When should a business issue a debit note as opposed to a credit note?

I look forward to your reply.

Kind regards,
Chantel

 


Hi Chantel

This often causes confusion in practice and is often taught incorrectly at school level too.

A credit note is issued to a debtor that has returned previously purchased goods or services, or has requested a rebate on such purchase for various reasons – e.g. inferior goods, advertised discount never allowed at point of sale, etc.

A debit note is also issued to a debtor, but to increase the amount pertaining to a credit invoice – when such an invoice is too low in value.

For example:

A business sold goods on credit to Mr X for R 342 including 14% VAT. The invoice has been batched and posted already. The business then realises that the invoice amount should actually have been R 570 including VAT. As the law prohibits the business from issuing another invoice with a different invoice number for the same goods, the business has to issue a debit note for the difference. The debit note will be for R 228 including VAT.

Hope that helps!


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The ICBA is a professional body for finance professionals and office administrators. If you’re qualified in these fields, or are studying them right now, here’s why you should become an ICBA member:

  1. If you already hold an ICBA-recognised qualification (from the ICB or elsewhere), you can put a designation (letter – e.g. CSBIcba(SA)) behind your name, as long as your ICBA membership is current.
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