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Differences Between Debit Note vs Credit Note
In today’s business culture, the value of debit note and credit note is unparalleled. Since every small business becomes big in almost no time, it’s prudent to understand debit note and credit note clearly.
- Debit note is an official, articulated form of purchase return. Through debit note, the buyer intimates the seller that they’re returning some goods that they have bought and mentions the reasons behind it.
- In the same manner, credit note is also an official, etched out, written format of stating sales return. Through credit note, the seller intimates the buyer that the money for which the debit note is sent is being returned.
Understanding these two in detail can revolutionize one’s business. In this article, we will throw light on these two concepts and find out the comparative differences between debit and credit note.
Without much ado, let’s get started with the head to head differences between debit note vs credit note.
Debit Note vs Credit Note Infographics
Actually debit and credit notes are two sides of the same coin. Let’s have a look at the main differences between these two debit and credit note –
Debit Note and Credit Note – Key differences
Even if debit note and credit note are two sides of the same coin, there are few key differences between debit note vs credit note –
- Debit note is usually issued by the purchaser and credit note is usually issued by the seller. But debit note can be issued by the seller when the buyer erroneously records more and credit note can also be issued by the buyer when the seller undercharges the buyer.
- Debit note is prepared in blue ink because it shows a positive amount. Credit note, on the other hand, is prepared in red ink because it shows a negative amount.
- Debit note is issued because the purchaser wants to state that he is overcharged or there are a percentage of defective products included in his purchase. Credit note, on the other hand, is issued in return to the debit note stating that the seller would credit the purchaser with the amount which was found defective or which was overcharged.
- The debit note doesn’t only affect the purchase return account. It may also reduce the purchase amount for error of overcharging. Credit note also doesn’t affect only the sales return account. A credit note can also be issued for erroneously overcharging.
- Debit note is issued only in the case of credit purchase. A credit note is issued only in the case of the credit sale.
Debit Note and Credit Note (Comparison Table)
|Basis for Comparison between Debit vs Credit Note||Debit Note||Credit Note|
|1. Meaning||Debit note is the articulated form of purchase returns to the seller and intimating the reason behind it.||Credit note is the 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 by||Purchaser of goods who found one or more discrepancies/defects in the goods.||Sales team who have sold off the goods.|
|4. Accounting entry||In the buyer’s account, supplier account is debited and purchase return is credited.||In seller’s account, sales return account is debited and customer account is credited.|
|5. Result||Purchase account is reduced.||Sales account is reduced.|
|6. Ink used||Blue ink.||Red ink.|
|7. Entry in||Purchase returns book (mostly)||Sales returns book (mostly)|
Understanding debit note and credit note 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 own 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 note 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
This has been a guide to differences between Debit Note vs Credit Note, its examples and infographics along with comparison table. You may also have a look at the following articles on accounting to learn more about accounting.