Debit Note

Reviewed by Sujaini | Updated on Feb 01, 2023


What is a Debit Note?

A debit note is a document a seller uses to remind the purchaser of current debt obligations, or a document produced by a purchaser when returning goods purchased on loan. The debit note may include information about an immediate payment or may serve as a reminder of current funds due.

The cumulative expected credit sum may be provided for items returned, along with an inventory of the items returned and the reason for the return.

Understanding Debit Note

A debit note, widely used in business-to-business transactions, is also known as a debit memo. These deals also require credit extension, ensuring a seller must deliver a shipment of products to a client until the customer pays the cost of the goods.

Even if real assets change hands, real money is not exchanged until an actual invoice is given. Alternatively, debits and credits are entered into an accounting system to keep track of shipped inventories and payment due.

Debit notes are different from invoices since usually they are written as letters and do not demand immediate payment. Debit notes remind the consumer of potential debt commitments based on sums which have yet to be formally invoiced.

Alternate Forms of Debit Notes

Aside from the letter format, debit notes can also be issued with purchased goods as shipping receipts. While it must be noted that the sum due is payable, payment is not anticipated before an official invoice is submitted to the buyer. This can give a customer the ability to return goods without first having to make a payment, if necessary.

Many debit notes may be submitted as informative postcards that act as a reminder of the debt accrued by the buyer. It can be useful in situations where the vendor is uncertain if an initial invoice has been obtained or updated. The postcard will also provide information about how to settle the debt, such as specific contact details.

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