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!
Don’t forget that I’m here to answer your questions about the ICBA, or just queries about your accounting at work. All you have to do is email me!