Debit Note vs Credit Note

Difference Between Debit Note and Credit Note

Both the debit notes and the credit notes are issued in the situation involving the return or cancellation of goods and services by one party to another, where debit note is issued by the buyer of goods and services if it is returned back to the vendor whereas the credit note is issued by the seller of goods and services if it is returned back to him by the purchaser.

In today’s business culture, the value of debit and credit note is unparalleled. Since every small business becomes big in almost no time, it’s prudent to understand these notes clearly.

Understanding these two in detail can revolutionize one’s business.

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Debit Note vs Credit Note Infographics

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Key Differences

Comparative Table

Basis for Comparison Debit NoteCredit Note
1. MeaningIt is the articulated form of purchase returns to the seller and intimating the reason behind it.A credit note is a similar articulated form of sales return and informing that the purchase return is being accepted.
2. Another form of Purchase returns of goods.Sales returns of goods.
3. Sent byThe purchaser of goods who found one or more discrepancies/defects in the goods;Sales team who have sold off the goods;
4. Accounting entryIn the buyer’s account, the supplier account is debited, and the purchase return is credited.In the seller’s account, the sales return account is debited, and the customer account is credited.
5. ResultThe purchase account is reduced.The sales account is reduced.
6. Ink usedBlue ink.Red ink.
7. Entry inPurchase returns the book (mostly)Sales returns book (mostly)

Conclusion

Understanding both is very important for any business because, at different times, you may need to issue each of these. While issuing a debit note or credit note, one thing you should remember that you cannot issue a note just like that. You should do your due diligence, see through the goods yourself, and then see whether there’s any other alternative.

For example, while issuing a credit note in return to debit note, many sellers issue credit notes stating that the amount for which the debit note is issued can be used by replacing the goods without returning the amount. If you understand this well, a lot of issues of business will solve, build great relationships with your stakeholders & other businesses, and you would also thrive as a business.

Video on Debit Note vs. Credit Note

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