What Is Debit & Credit Note

Debit Note and Credit Note are used while the return of goods is made between two businesses.Debit Note is issued by the purchaser, at the time of returning the goods to the vendor, and the vendor issues a Credit Note to inform that the returned goods have been received by him. 

Comparison Chart

BASIS FOR COMPARISON	DEBIT NOTE	CREDIT NOTE
Meaning	Debit Note is a document which reflects that a debit is made to the other party's account.	Credit Note is an instrument used to inform that the other party's account is credited in his books.
Use of	Blue Ink	Red Ink
Represents	Positive Amount	Negative Amount
Which book is updated on the basis of note?	Purchase Return Book	Sales Return Book
Effect	Minimization in account receivables.	Minimization in account payables.
Exchanged for	Credit Note	Debit Note

*Definition of Debit Note

A commercial instrument made and issued by the purchaser and delivered to seller giving details regarding the amount debited from the seller’s account and the reasons for the same is known as Debit Note.

• When the buyer’s account is overcharged by the seller, buyer sends a debit note to seller.
• When the buyer returns back the goods purchased by him, then also he delivers debit note.
• When the seller’s account is undercharged by the buyer, then he issues debit note.

The seller issues a credit note to buyer as an acknowledgement of the Debit Note. It is written in blue ink. In general, Debit note reduces the receivables.

THE OTHER FOLLOWING REASON IS 

1.FAULTY GOODS

2.INCORRECT AMOUNT

3.WEIGHT IS NOT CORRECT

4.ALTERNATIVE GOODS

Note:buyer can send both debit note & credit note

*Definition of Credit Note

A memo prepared and issued by one party to the other party, containing the details of the amount credited to the buyer’s account and the reasons for so, is known as Credit Note. It is issued in exchange for the Debit Note. It gives the information to the buyer, that is account is credited in the vendor’s book. The note is prepared with red ink. The reasons for issuing a credit note is as under:

• When the seller’s account is overcharged by the buyer, seller sends credit note.
• When the supplier gets back the goods sold by him to the buyer, then also credit note is issued.
• A buyer can also send credit note, in case he is undercharged by the seller.

The issue of credit note, shows that the account payables are reduced. In general, it shows negative amount.

*Key Differences Between Debit  Note and Credit Note

The following are the differences between debit note and credit note:

1. A memo sent by one party in order to inform the other party that a debit has been made to the seller’s account, in buyer’s books is known as Debit Note.
2.  A commercial document which is sent by one party in order to inform the other party that a credit has been made to buyer’s account, in seller’s books is  known as Credit Note.
3. Debit Note is written in blue ink while Credit Note is prepared in red ink.
4. Debit Note is issued in exchange for Credit Note.
5. Debit Note represents a positive amount whereas Credit Note represent negative amount.
6. Debit Note reduces receivables. On the other hand Credit Note reduces payables.
7. On the basis of the Debit Note, purchase return book is updated. Conversely, sales return book is updated with the help of a Credit Note.