Credit Note

A credit note is issued when a seller locates a discrepancy in an existing invoice, for instance,  by charging an incorrect amount or when a buyer returns the goods. It represents the amount that was paid in excess by the buyer and is due to be returned to them by the seller.

There are several benefits to issuing credit notes, which are listed below.

• Complete financial records: Issuing credit notes ensures your accounting books are accurate and compliant. This is because, instead of removing an inaccurately issued invoice, a credit note keeps the record of both the previous invoice as well as its offset in the form of a credit memo.

• Tracking funds: Credit notes facilitate firms in keeping track of their accounts receivables and cash balances. They can also adjust their sales tax records based on the credit memos issued.

• Complete transparency: A credit note enables both the buyer and seller to stay on top of their account balances. A buyer can accordingly either avail of a cash payment in case of a fully paid invoice or use this memo for future invoice payments.